Minority shareholder activist charges certain controlling shareholders on move to devalue stocks

10 May 2019 12:10 am

•  Urges SEC and Central Bank to intervene to protect minority shareholders 
•  Reveals plans to create shareholder fatigue and engage in force selling of shares

 

A leading good governance advocate and minority shareholder activist in the country recently called on the Central Bank and the Securities and Exchange Commission (SEC) to intervene to protect the interests of public and minority shareholders, as certain controlling shareholders and related parties are allegedly on the move to devalue stocks by creating “shareholder fatigue.” 

Writing to the SEC Chairman Ranel T. Wijesingha and Central Bank Governor Dr. Indrajit Coomaraswamy, former Chairman of Ceylon National Chamber of Industries (CNCI), K.C. Vignarajah warned that these parties want to unjustly enrich controlling interest (CI) and impoverish independent minority shareholders (IMS).

“It is common knowledge that the market has been manipulated and pushed down. It is now the focus of local and foreign experts, as well as policy makers, and the aid groups. They have commented on the lack of sufficient protection for IMS,” he stated. 

In order to create shareholder fatigue, Vignarajah said certain controlling shareholders have resorted to reduce public holding, to reduce profits by siphoning off profits to related parties, associates or subsidiaries, to lower the valuation of assets (sometimes on claim of IFRS standards) and to announce unfairly low dividend pay-out ratio/ percentage. 
Further, he alleged that some firms are conspiring with brokers and financial institutions to ‘force sell’ after driving down share prices due to liquidity, marketability of difficulties which were created by them.

Vignarajah noted that these illegal activities are subjected to related offenses such as insider dealing, market manipulation, criminal breach of trust and unjust enrichment of the controlling interest & related parties (CI&RP) whilst impoverishing the investing public. “The insidious economic and stock market terrorism is far more damaging and devastating than the horrific terrorism that surfaced on Easter Sunday”