SEC,CSE to meet Treasury on EPF and ETF funds

The Employees' Provident Fund (EPF) and Employees’ Trust Fund (ETF)’s suspension of investments in the Colombo Stock Exchange (CSE) a year ago in the wake of the pump and dump era 3- 4 years ago, has forced authorities to lobby the Treasury for both agencies to return to a lacklustre market.

Official sources said the reason for the pullout was believed to be because the EPF had incurred losses through the purchase of stocks in companies with artificially inflated share prices. The Treasury’s stance is that EPF is not the private fund of a few people who decide on its investments; particularly questionable transactions in the CSE where allegations of ‘pump and dump’ have been made. Now that the new plan of the present government is to set up a public trust to independently manage these agencies by amalgamating them to create a new national pension fund that will have a combined worth of Rs. 1.7 trillion, the Securities and Exchange Commission (SEC) and the CSE will be meeting the Treasury next week seeking a revision of last year's deci- sion, the sources said. Treasury officials also confirmed this saying that amongst the number of matters that are to be discussed, the EPF/ETF issue will be top of the agenda.

“We will be looking at it favourably,” a Treasury official told the Business Times.

The capital market in Sri Lanka is largely dominated by domestic investors versus its emerging market peers. Only 6.5 per cent of the Rs. 3.1 trillion market capitalisation of the CSE is controlled by institutional institutions such as EPF, ETF, insurance companies and Unit Trusts.

For a long time analysts have been trying to lobby the Treasury to raise this. The troubles in the CSE during the last regime made the Treasury stop the two agencies from investing in shares. “The absence of a professionally managed non captive large institutional investor base in Sri Lanka is an enormous challenge. The main long term superannuation funds are largely captive and are saddled with conflict of interest,” an analyst said expressing hope that the meeting with the higher authorities will be positive.

The officials are also slated to discuss developing financial derivatives such as repos and swaps, as well as asset-backed securities markets, etc.