Securities and Exchange Commission Chairman Tilak Karunaratne was forced to resign when he was about to take action against the wrongdoers as per the SEC Act, UNP National List MP Dr. Harsha De Silva charged yesterday.
Dr. De Silva told journalists that there would be ‘Regulatory Capture’ when it comes to the Colombo Stock Exchange shortly, where those who used inside information to engage in certain transactions are trying to gain control of the Securities and Exchange Commission (SEC).
According to Investopedia ‘Regulatory Capture’ is the process by which regulatory agencies eventually come to be dominated by the very industries they were charged with regulating.
UNP MP said that this would be a dangerous move as those who gain control of the SEC could act according to their whims and fancies if they manage to take it over.
He also stressed that action should have been taken against those who are engaged in transactions using inside information as per the provisions set out in the SEC Act. UNP MP said that this situation has already resulted in the collapse of the secondary market which is dependent on the primary market, where initial primary offerings take place.
He said that the only activity that is taking place in the market today is the mere buying and selling, while usage of various options and instruments in the market had come to a standstill.
Accepting that there had been foreign investments in the stock market for a period of one year,
Meanwhile, in its typical lukewarm fashion, Ceylon Chamber of Commerce (CCC), which is considered the country’s premier business chamber said in a one paragraph statement that it ‘notes with concern’ the statement made by SEC Chairman Tilak Karunaratne to the media on his resignation.
“The resignation of two SEC Chairpersons within a period of less than one year will be viewed with concern by investors, corporates and other stakeholders. An effective and stable regulatory framework is critical to ensure a robust and sustainable capital market, which delivers long-term value to all stakeholders,” the statement noted. he said the investors in the villages had lost faith in it as they have lost their investments.
Citing an example he said that he had been informed by some investors in Embilipitiya recently that they have lost every cent they invested in the market.
Also he said that some of the foreign investors had put in only a small fraction of capital in the Colombo Stock Exchange.
“Failure of the government had led to all these issues,” he said.