CSE new rules on errant firms of public float in June

The Colombo Stock Exchange ( CSE) will issue directions on non- compliance pertaining to public float by June, officials said. The Securities and Exchange Commission (SEC) has now sanctioned the minimum public float rules that represent a portion of shares of a listed firm that are in the hands of public investors as opposed to shares owned by the company's institutional shareholders and will enforce penalties for those who don’t comply, they said.

Early last year, 30 – 40 listed firms requested more time to comply with these rules. Also certain listed firms which don't fall into SEC's minimum public flat requirements announced their intention to get off the CSE. The officials said that the penalties on non-compliant firms will also kick in by June. They declined to say what they were.

The rationale for a minimum float is that a sizeable public float is a necessity to ensure a market is fair, orderly and efficient, a CSE official said. The introduction of a minimum public float as a continuous listing requirement is considered by all regulators in order to promote liquidity and ensure a better price discovery mecha- nism, he added. “It's an established fact that greater the public float less is the potential for market " he said. The time duration for compliance will end in June.

Research by the SEC found that as at June 2011, 35 per cent of the listed firms in the Main Board had a public float below 20 per cent while 12 per cent had a public float below 10 per cent. Data showed that 36 per cent of the Diri Savi Board companies had a percentage below 10 per cent.