SEC to take disciplinary action against brokers on capital adequacy

3 August 2017 12:01 am - 1     - {{hitsCtrl.values.hits}}

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The capital market regulator, the Securities and Exchange Commission (SEC), yesterday said going forward disciplinary actions would be taken against the stockbrokers who do not adhere to the capital adequacy requirements introduced last year.


The SEC last year said each stockbroker would be required to maintain a risk-based capital adequacy ratio (CAR) of 1.2 times of the total risk, starting from March 2017, in addition to the existing minimum liquid capital of Rs.35 million.


During a meeting last week, the SEC approved to incorporate disciplinary action under the Stockbroker Rules of the Colombo Stock Exchange (CSE).


The stockbrokers, who fail to meet the CAR five times within 30 calendar days or seven times within three months, will be prohibited from carrying out purchases of securities and those who receive such prohibitions on three separate occasions will be suspended as a member of the CSE.


For a period of one month, the CSE and SEC will regularly monitor the stockbrokers who receive prohibitions until such brokers submit a capital augmentation or rectification plan and comply with the CAR.


The stockbrokers, who fail to comply with this within the given month, will be prohibited from carrying out all trading activities and within two weeks will have to inform their clients of non-compliance of the CARs, stop canvassing new clients and smoothly transfer the portfolios of clients to other stockbrokers or custodian banks and settle the dues to investors and creditors.

These non-compliant brokers will then be given further two months to submit a revised capital augmentation or rectification plan, which is acceptable to the CSE, and will be allowed to trade no sooner they comply with the CARs and other minimum standards under the Stockbroker Rules.
Those who fail to meet the requirements within these two months will then have their membership in the CSE as a stockbroker firm suspended, unless the CSE decides to waive such suspension with the approval of the SEC, subject to appropriate conditions.

 

 

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  Comments - 1

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  • sacre blieu Friday, 04 August 2017 09:13 AM

    The irony of Justice? What a joke. There are ample evidence to take a good number of brokers who were responsible and became partners in the same crime of the stock market fraud years ago. This is selective justice for the lesser offence to allow them immunity from further prosecution. Where the hell is all this going to end. If the PM can do it, why can't they?


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