SEC introduces interim measures
The Securities and Exchange Commission of Sri Lanka at its meeting
held on May 22 , 2012 having deliberated at length on the transaction of
"The Finance Company PLC" shares by National Savings Bank through the
Stockbroker-Taprobane Securities (Pvt) Ltd which also led to a
settlement failure by the custodian bank, decided to introduce certain
interim measures to enhance the smooth functioning of the payment and
settlement cycle for trades carried out through the Colombo Stock
Exchange until a DVP System is introduced as a pre cursor to the
establishment of a clearing house which will manage the Central
Counterparty risk.
Therefore the Colombo Stock Exchange is hereby directed;To introduce
an upper limit on the price of transactions carried out on the crossings
board, where the price variance of a unit share price does not exceed
twenty per centum (20%) from that of the closing price.
The "closing price" shall have the same meaning as set out in the
Automated Trading Rules of the Colombo Stock Exchange; To amend the
relevant provisions of the Automated Trading Rules to incorporate clause
(1) above;When undertaking transactions for an on behalf of the National
Savings Bank to require all Stockbrokers to obtain a Certified Board
Resolution in respect of all transactions of Rs. 20 Million and above.
The format of the Certified Board Resolution of the bank to be in
compliance with the provisions of the National Savings Bank Act No. 30
of 1971 (as amended).
Require the National Savings Bank to use a third party custodian bank
in respect of all custodial trades of the bank in the future.
The CDS to ensure strict compliance with the Central Depository
Systems Rules by all participants and discourage the adoption of
practices deviating from the rules, especially in respect of the minimum
margin rule of 15 % which has to be provided by the brokers for all
purchases over and above the value of Rs. 20 Million and the rule
pertaining to the affirmation of trades by the custodian banks by T+1 in
respect of all purchases, both of which are currently in force.
In addition to the above, the SEC was concerned about some investment
advisors not following best practices with regard to avoiding conflicts
of interest between themselves and their clients.
Therefore it was decided to introduce trading restrictions to all
employees of Stockbroking Companies until the SEC is satisfied that the
industry has adopted improved practices and effective compliance
mechanisms on the procedures followed by licensed Stockbrokers in
handling staff trades.
Therefore the Colombo Stock Exchange is further directed;To prohibit
Executive Directors, Employees, their spouses and their nominees of all
licensed stockbrokers and stock dealers from selling listed shares
purchased from the secondary market for a period of 6 months from the
date of purchase.
The above said prohibition shall not apply to shares purchased at an
Initial Public Offering, shares owned as an entitlement under an
Employee Share Option Scheme or with regard to subscriptions to a rights
issue.
Clause (1) of this directive shall come into effect on June 5, 2012
and shall continue to be in force until a DVP system is established by
the Colombo Stock Exchange.
Clauses (2) to (5) of this directive shall come into effect from June
1,2012 and shall continue to be in force until a DVP system is
established by the Colombo Stock Exchange. Clause (6) of this directive
shall come into effect on June 1, 2012.
Colombo Stock Exchange is required to inform all licensed
Stockbrokers and Stock dealers of this directive. |