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SEC seeks rule change to lure pension funds to debt market

22 August 2013 03:08 am - 0     - {{hitsCtrl.values.hits}}


While steps are being taken towards facilitating US dollar bonds issuances by Sri Lankan corporates, capital market regulator is currently exploring the possibilities in getting the restriction on large pension funds in investing in the country’s corporate debt market, relaxed.

According to the Securities and Exchange Commission (SEC), the rationale behind this initiative is to encourage longterm fund investments in to the corporate bond market.

“We are currently in discussions with the Treasury, Central Bank, Insurance Board etc. to relax these restrictions and allow more devolvement from these funds,” SEC Chairman Dr. Nalaka Godahewa.
Currently, the investment guidelines of long term pension funds such as insurance funds, Employees’ Provident Fund, Employee Trust Fund etc. do not permit large investments in corporate bonds.

Participating in a panel discussion on the ‘Diversification Opportunities for Financing for Sri Lankan issuers’, organized by Standard & Poor’s last week, Dr. Godahewa observed the absence of an active secondary market in Sri Lanka as an impediment for the corporate bond market to take off.

“One important thing to develop the corporate bond market is to have an active secondary market. To do that, one thing we are lacking in Sri Lanka is the market makers,” he observed. Mirror Business previously pointed out that corporate debt is highly concentrated among a very few large institutional investors such as banks and large corporates.

And it was also highlighted that predominantly due to the lack of liquidity, there is virtually zero secondary trading of these listed corporate debts.

However, SEC has proposed to bring down the minimum subscription of corporate bonds to Rs. 10,000 from the current high of Rs.1 million or so in order to bring active retail participation.(DK)

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