SEC ropes in CID and FIU to battle capital market scams

From left: SEC Chairman Prof. Hareendra Dissabandara briefs media regarding rogue market operators while SEC Deputy Director General Tushara Jayaratne looks on
PIC BY KITHSIRI DE MEL 

• SEC says as interest rates in banking sector decline, investors seeking higher returns are migrating to share market, inadvertently attracting fraudsters
• In SEC radar are two major scams currently in operation: ‘Blue Ocean Securities Limited’ and ‘Gladius South Asia’

By Nishel Fernando
The Securities and Exchange Commission of Sri Lanka (SEC) has announced a strengthened collaborative mechanism with the Criminal Investigation Department (CID) and Financial Intelligence Unit (FIU) of the Central Bank to combat a rising wave of sophisticated financial scams targeting capital market investors.
SEC Chairman Prof. Hareendra Dissabandara revealed that as interest rates in the banking sector decline, the investors seeking higher returns are migrating to the share market, inadvertently attracting the fraudsters who are shifting their operations from the banking sector to the capital market.
During a media conference held in Colombo yesterday, the regulator disclosed the details of two major scams currently in operation: ‘Blue Ocean Securities Limited’ and ‘Gladius South Asia’.
In a startling revelation regarding the audacity of these fraudsters, SEC Deputy Director General Tushara Jayaratne disclosed that the agents from ‘Gladius’—a scheme enticing the locals to invest in foreign stock markets—had unknowingly cold-called the SEC officials to solicit investments.
“The funny part is that they call us, the SEC staff members. They called me one day and said they are calling from this company called Gladius,” Jayaratne said. 
“When I asked for their legal background, they said they are registered and licensed by the SEC. I told them, ‘You are calling the SEC right now. I am the DDG and we have the recording’.”
Jayaratne noted that Gladius appears to be a reincarnation of a previous scam entity, ‘Copreus’, which operated from the same building and closed down during the Covid-19 pandemic after allegedly defrauding an investor of Rs.140 million.
Regarding Blue Ocean Securities, the officials explained it operates through WhatsApp groups and a fake mobile app named ‘BOMate’.
“From this app, you can trade (visually) but from our system, you can’t see any transactions. This is a huge scam,” Jayaratne warned, adding that the funds deposited are siphoned into unrelated bank accounts. The SEC admitted its limitations in tackling these issues in isolation, as it lacks the mandate to arrest the suspects or freeze the bank accounts—powers that reside with the Police and Central Bank. Consequently, all findings, including 35-40 telephone numbers and bank account details, have been handed over to the CID and FIU.
“We can’t interfere (with) the Central Bank activities. Only thing is we can report it,” Prof. Dissabandara stated, confirming that the regulator is working closely with the law enforcement to track the perpetrators. Shifting focus to development, Prof. Dissabandara unveiled a 12-point transformative strategy, emphasising that the capital market must play a larger role in national economic recovery to achieve a targeted 8-9 percent economic growth rate.
Prof. Dissabandara proposed that the government should utilise the capital market to fund major projects through “infrastructure bonds” rather than relying solely on traditional debt. 
“Now we see only for the railway you need billions... more than 200 billion we need. So, I think we can think about at least infrastructure bonds in this country,” he said.
The SEC highlighted a severe disconnect in the market: while Sri Lanka has over 200,000 registered companies, only 286 are listed on the Colombo Stock Exchange—less than one percent. The SEC has set an ambitious target to increase this to 500 companies within three years and 1,000 within five years.
Currently, while there are approximately 2.2 million CDS accounts, Prof. Dissabandara noted that the “active” investor base is approximately 60,000—less than one percent of the population. Citing the recent success of PickMe, which raised nearly Rs.700 million following a SEC roadshow in Singapore, the regulator expressed confidence in attracting foreign inflows if market integrity is maintained.
The SEC also addressed the rise of unregulated “financial influencers” or “finfluencers”. The regulator plans to introduce a code of conduct and guidelines for influencers, benchmarked against the standards in Australia, the UK, Japan and IOSCO, to ensure they disclose sponsorships and qualifications.
“If any indication comes from anyone showing you 50 percent, 70 percent, 90 percent return, don’t consider [it]... Markets do not grow sustainably on prices alone. They grow on confidence, credibility and trust,” Prof. Dissabandara concluded.