SEC Sri Lanka

Sri Lanka’s Securities and Exchange Commission has come out with several rule changes to eliminate the risk of settlement failure until the Central Counter Party regime is in place.

Accordingly, the SEC prohibits employees and Directors of all market intermediaries to trade and sell shares within six months of buying, except in the case of IPO buying.

The SEC also says crossings transactions should have a 20% upper limit unless exceptionally allowed by the CSE on a case by case basis.

It rules that the current 15% margin before trade execution to be strictly enforced including for NSB.

The regulator also plans to have a more robust enforcement mechanism with clearly defined punitive measures for violations of rules by stockbroker firms, CEO’s, Directors and investment advisors.

SEC instructs on future transactions where NSB is a party, all large NSB orders to have a certified Board resolution.

It also says NSB need to use a third party custodian bank.

While these new regulations are place, SEC is planning to intensify its efforts to implement the CCP for all transactions at the Colombo Stock Exchange to eliminate this risk of settlement failure.

The SEC is of the view that the Settlement Risk which currently exists between T  and T+3  will be fully eliminated only after Central Counter Party (CCP) is in place.

The latest regulatory action comes after the controversial NSB – TFC deal, which saw the buyer pulling away from settling the payments, after agreeing to buy the shares.

The new rule changes have been discussed and agreed by the SEC commission after  having discussed at length the transaction of The Finance PLC shares by National Savings Bank (NSB) through the stockbroker firm Taprobane Securities (Pvt) Ltd.

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