The Securities and Exchange Commission (SEC) came under heavy criticism by the Committee on Public Enterprises (COPE) last week for its inaction to control what former chairman Tilak Karunaratne termed as the stock market mafia, sources said.
It was revealed at the COPE inquiry that the SEC has not taken any remedial nor legal action following the much publicized investigations on market manipulations and illegal transactions in the SEC in May last year.
A parliamentary source said the SEC was summoned before COPE for a re-examination last Thursday when inquires for 2012–2013 were concluded.
The SEC had three chairpersons within a one year period. Ms. Indrani Sugathadasa resigned after serving as the chairperson for less than two years. Mr. Karunaratne was appointed to the post but he too resigned saying he was unable to carry out his duties because of pressure from various quarters.
Under Mr. Karunaratne the SEC initiated investigations into the suspicious activities such as insider dealings, front running of shares and suspicious share transactions and market manipulations by nearly two dozen companies listed in the stock exchange at the time “The SEC has issued warnings to some establishments and imposed fines on several others following the findings of the Surveillance Division (SD). The SD also pledged that the SEC would take legal action against those who manipulated market transactions for their benefit. But the COPE had found that no action had been taken in this regard or taken measures to amend the SEC act as instructed by the COPE.
The source said the SEC was extensively questioned on the delay in submitting its amendments to the SEC Act. Like the two previous chairpersons, the incumbent Chairman Nalaka Godahewa too admitted the inadequacy of the law to effectively counter and detect frauds and manipulation in the stock market by certain stock brokers, who are operating as a mafia. The delay in the SEC to take legal action against identified perpetrators was also questioned.
The wide discretionary power exercised by the investigating arm of the SEC in the absence of proper criteria, the absence of or decline of detections, mitigating punishments to the offenders and compounding of cases under the new management was criticized by the COPE members, the source told Daily Mirror yesterday.
COPE Chairman and Senior Minister D.E.W. Gunasekara at one stage quipped, “We are quite aware of what was going on in the stock market. We know what made the previous Chairmen to quit. Your job is a risky one. Bring in the amendments to the Act and strengthen yourself. We are there to help you. Fearlessly expose the culprits and give them deterrent punishment. Then only the investors will have confidence in you.”
It is interesting to note that the SEC Director General Harendra Dissbandara tendered his resignation on Friday after he appeared before the COPE the previous day. (Sandun A. Jayasekera)