Security and Exchange Commission (SEC) Chairman Tilak Karunarathne in an interview with the Dailymirror asserts that he intends on creating investor confidence in the capital markets. He spoke of what led to his resignation during his previous stint and commitment to ensure that justice was meted out to those who were alleged to have committed illegal acts in the capital market.
The last time we interviewed you was when you resigned as the Chairman of the Security and Exchange Commission. Are you now in a position to tell us what exactly took place that led to your resignation?
I think the facts are well known, and I have gone on record even at that time. Basically when I took over as the regulator of capital markets, there was a lot of pressure from the very top. I accepted this position on two conditions. The first was that I was going to do an honorary job, the second was that there should not be any interference in discharging my duties as the Chairman of the SEC. President Rajapaksa then said “Mamane oyawa pathkaranne, ithin kawuda okata angili gahanne?” (I am the one who is appointing you so who is there to interfere?) To see, it was the very man who appointed me who started interfering with my work. I don’t want to mention names obviously but there were well known investigations that we commenced. Then he asked me “Why are you investigating so and so”? I said “Sir we have reason to believe that he had done something wrong. Therefore we are investigating.”
This is a conversation between you and the then President?
Yes, so he said “but you don’t understand that these are the people who helped us and financed us in our election campaigns. We need them”. Then I told him that it was he who appointed me and assured me that there would not be interference in the discharging of my duties, and that I could do it independently. Then he said “No, but you have to stop” and I refused. And then there were so many instances like these when he wanted me to stop. To every one of those requests, I replied in the negative. Then it came to the famous NSB-TFC deal, I found a small provision in the Act which could reverse the deal because the State would have lost a lot of revenue. During that time he asked me “why are you having so and so in your office?” I said that person was summoned to record a statement. He told me that this was being done to drive a wedge between ‘me and the CJ’ (Chief Justice, whose husband was the Chairman of the National Savings Bank). I told him that all the people behind this deal must be investigated, such as the Board of Directors, The General Managers etc. Then there was another investigation against a top investor. One evening, he rang me and asked “are you investigating so and so”. I said”Yes”, he then asked me “why” and he said “no, don’t do it, stop the investigation”. By that time we had got the papers ready to file action against this individual.
If we may stop you there, we don’t see a difference in what you said then and what you are saying now, because the people who are accused of these acts are being shielded. You are using vague terms to describe them. Don’t you think it’s high time that the public are made aware of these names?
They have not been found guilty as yet.
But they are under investigation…
I could mention three, because the Prime Minister mentioned these names in Parliament. One is Reefcomber, another is Colombo Land and while the other is ERI. Now the ERI investigation has been closed and the offences were compounded and a fine was imposed. In my opinion, we could have done more. I don’t want to mention any other names.
To bring you back to what you told us when you were resigning, you publicly said that you would reveal the names of the people behind these deals if justice is not meted out. But you still seem reluctant?
Certainly, and that’s what we are doing now. It’s not the names that matter; it is the fact that we have reopened the investigations. So if there was sufficient evidence, and we have filed charges, then the names would be made public. If not, it isn’t fair for me to say them in public because I will be opening myself up to litigation against me.
Apart from the President himself, who else tried to influence you in your decision making during you previous tenure?
Well, there was the Defence Secretary. A few weeks after I took over, as a friend, Gotabaya Rajapaksa contacted me over the phone and said “Tilak, these people are my friends. They seem to have a problem at SEC and just see what you can do.” Of course Gotabaya Rajapaksa is my friend and I knew him since my school days, although he was junior to me. But during the later stages I knew him as the younger brother of President Rajapaksa whom I associated closely. So I said “OK, let them come and see me”. I didn’t see them here but at my private office and had a long discussion with them. I told them that they did not have to worry if they haven’t done anything wrong, but I could not help them in anyway. The investigations went ahead because it was not my part to influence the investigators just because someone has spoken to me regardless of how influential they might be.
Was there any involvement by Namal Rajapaksa in all these matters?
Not with me, certainly not with me. But I remember one of your papers which carried a story in which it said that the President’s son had mentioned two names and said that these are the modern investors and the new investors this market needed.
What made you accept the position again after all that happened?
Before the election, the then opposition leader Mr. Ranil Wickremesinghe invited me one day for a chat and he asked me what I was doing.
I told him that I was relaxing, I was a bridge player and I have a place in Bolgoda and that I was keeping myself occupied.
He wanted me to join him and support him, and I agreed. Then Mr. Maithripala Sirisena came forward as the common candidate, I was then made in-charge of the Kalutara District. After the victory, the Prime Minister told me “Tilak you have unfinished business left, why don’t you take over the SEC and finish it”. I was initially not very positive because I didn’t want to be back here and he insisted that I should take over and told me to continue with the good work.
So do you actually have unfinished business here Mr. Karunarathne?
Yes, a lot. I would try to finish them as soon as possible, but I don’t think it would be possible to finish within 100 days. We are short-staffed and the Director General’s position is still vacant. The processes are set in motion. We have reopened three files and we would continue to carry on.
After your departure, there was an interim period during which Dr. Nalaka Godahewa took over. What are your thoughts on that period?
I really don’t want to comment on my predecessor, and the Commission at the time. There were some good things that they brought in. But I am not happy about the way they conducted themselves where investigations are concerned.
Is the assumption that they protected some of the wrongdoers by virtue of their office?
That is a difficult question for me to answer because without concrete evidence it’s not right to pass judgments on anybody. But there was a lot that could have been done.
Before your resignation, you submitted a report to the COPE in which you detailed 17 instances of violations. You have re-opened three, what about the rest?
Enforcement action has been taken on four cases, and there is nothing that we can do about it now. We are carrying out action on the other 13. We are actually prioritizing them as being the most important and then working downwards. So we have started on three. Meanwhile, there have been several complaints since I rejoined from several small investors. They had invested during the boom because they were attracted to the Stock Exchange. Some of the brokers have misled these people and we are looking into them as well.
Is it correct to say that during the run-up to your taking over the first time, there was no regulation whatsoever and the stock market was arbitrarily played?
Sure, you are right. The Commission never acted prudently as well because they brought in credit limits and other such artificial measures instead of addressing the root of the problem. Yes, of course there were a lot of pump and dump cases. Many people made billions of rupees, while many lost their life savings. There are pathetic cases - one such example is where the husband had invested his spouse’s dowry and lost almost everything because somebody had advised they could make a 300% profit within three months. There are very sad cases. There are a lot of things to investigate.
You termed this the ‘stock market mafia’. During this interim period after you left were they silent? Was it because nothing happened much in the market?
They have made their money so I assume that they didn’t want to draw too much attention. I think a few of them have burnt their fingers.
We don’t mind that, but some of those who invested in these companies got themselves destroyed.
For instance, Citrus Kalpititya is one such example. The IPO was in 2011, I think and they raised 285 million from the IPO and borrowed another 600 million and they invested some of the money in Colombo Land, but nothing has happened so far with regard to the proposed hotel. The investors got a raw deal. I have told them to hold a special general meeting on May 2, and let the investors decide what necessary action shoul be taken. I think they were silent because they have made all their money and sway away from any attention. Sadly some people were devastated because of this.
Are you actually on a witch-hunt?
When I started I said that I was not. I am here to bring the culprits to book but I am not on a witch-hunt. My main job here is to manipulate the market properly. Not to over-regulate or under-regulate but to properly regulate the market so that it is a level-playing field for everyone. All the investors should be able to come in with confidence that their money will not be lost due to some illegal means. I was told by one of the Directors that when they went on one promotion tour overseas, one question both the CSE and the SEC could not answer satisfactorily was ‘How safe would my money be in the Colombo Capital Market?’ It was a serious question that failed to provied an answer to satisfy the investors. Our main priority is to give a strong confidence to the investors.