SEC relaxes grip on broker credit

16 August 2011 08:05 am - 3     - {{hitsCtrl.values.hits}}

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Securities and Exchange Commission a while ago announced that they have relaxed the restrictions on brokers providing credit to their clients subject to certain prudential requirements being met by the licensed stock brokers.

The decision was taken after evaluating the improving stability in the capital market together with the concerns expressed by the Colombo Stock Brokers Association and retail investors.

The prudential requirements stated in the SEC directive are;

•    To permit Licensed Stock Brokers to extend credit to investors over T+3 days based on the computation of Liquid Assets less Obligations, maintaining   a   leverage at zero level as set out in Annexure 1 hereto;
 
•    To amend the relevant provisions of the Member Regulations of the CSE in such manner to be consistent with this Directive
 
•    To mandate Licensed Stock Brokers to reconcile daily positions taken against the Liquid Assets by such Licensed Stock Broker and to submit on a monthly basis a declaration to the SEC and CSE confirming the position of Liquid Assets less Obligations as it stands at the end of each month. The declaration to be submitted within 2 market days after the end of each month.

The directive will be effective from the date hereof.
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  Comments - 3

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  • Abdul Tuesday, 16 August 2011 09:02 AM

    This decision will help the market temporarily and then lead to a credit crunch later on

    Janaka Tuesday, 16 August 2011 02:10 PM

    SEC can't cure the foolishness and greed of the retail traders. They deserve to lose money.

    Fayad Tuesday, 16 August 2011 09:17 AM

    This will create a bull-run, in weeks time market will crash again


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