Some may call it a triumph of the evil and others a victory against tyranny. But all will depend on how the market will respond to the news in the coming few weeks and months to the news of Securities and Exchange Commission (SEC) Chairman Thilak Karunaratne's resignation last Friday.
Karunaratne last week told media that he was under ‘immense pressure to resign' from well connected market players under investigations for market misconduct.
“We can't belittle this to the resignation of Karunaratne. This is much bigger. It made mockery of the entire system. The biggest problem we will face would be that no honest and forthright person would want to be appointed to run the SEC in future,” an investment banker who refused to be identified said.
“The result would be that investors will lose confidence in the market and its regulator, which can no doubt be detrimental to any capital market,” he added. He also stressed the good governance side of the issue saying that politicizing of the regulators would be the end of the road for any country.
However, some brokers and investors were seen breathing sighs of relief following the stepping down of Karunaratne.
“We don't want an anti-market regulator. We want somebody who will work with the market stakeholders and not somebody who acts arbitrarily,” a senior broker told Mirror Business on grounds of anonymity.
He also said that the resignation of Karunaratne will improve market sentiment and a ‘non-threatening' regulator will encourage both small and big investors to return to the market.
Nevertheless, the independent analysts Mirror Business talked to opined that the arrival of small investors is unlikely in the short term as they’d got their fingers burnt in previous bull runs based on so- called pump-and-dump of shares.
“Those small investors who got wiped out by earlier stock rallies may not enter the market immediately. But as always, there will be a new set of lambs coming into be slaughtered. But foreigners are most likely to keep themselves away from the market for some time,” an analyst added.
Incidentally, Mirror Business reliably learns that two foreign funds which have substantial investments in Sri Lanka and have been following the recent events, have expressed their concerns to their respective brokerages and local authorities. Foreign inflows to the Colombo bourse topped Rs.27 billion as of last week.
Meanwhile, Tourism Development Authority Chairman and former Asia Capital and Asia Securities CEO Asanga Seneviratne have been widely speculated as the front runners for the high seat at the SEC, while its controversial Director, Investigations, Dhammika Perera is tipped to be the Director General, succeeding the present Acting DG, Hareendra Dissabandara.
The others who had been reportedly offered the post were the two former SEC Chairmen, Gamini Wickramasinghe and Dr. Dayanath Jayasuriya. Both of them are believed to have turned down the offer.