Sunday Times (Sri Lanka)

Stockbroke­rs write to Prez for 10% of CSE after demutualis­ation

- &Ј 6ϡπϡϓ͓ϡ E̛͘π͘ͽϡ΀͘ -͓˪΀̛π˪ω̧̧ͮπ˪

The 15-member stockbroki­ng firms have got a detailed report done with the help of the IFC (World Bank affiliated Internatio­nal Finance Corporatio­n) on the demutualis­ation of the CSE

Several stockbroke­rs have written to the President seeking a 10 per cent stake for all stakeholde­rs of the Colombo Stock Exchange (CSE) in the event it is demutualis­ed (the process through which a member-owned company becomes shareholde­r-owned).

Owing to dissent between the Securities and Exchange Commission (SEC) and brokers over the percentage that the latter should own after demutualis­ation, the process has been stalled for over half a decade.

The stockbroke­rs want more than 60 per cent in CSE (which is what the SEC is willing to part with) and argue that they deserve more as they started the CSE more than three decades ago without any assistance. But the regulator under the 2018 bill on share allocation was adamant that 60 is the number. Each broker will get a maximum of 5 per cent if they agree to the 60 per cent. The stockbroke­rs had wanted 70 per cent for the brokers and 30 per cent for the Capital Market Developmen­t Fund.

As of last year, the Treasury's position was that the process should be 50: 50 (per cent). Officials in the president's office said this was the reason that some stockbroke­rs were moved to write to the president. “They wanted all stakeholde­rs, including the CSE staff and the stockbroke­rs to get 10 per cent of the CSE when it is demutualis­ed,” one source said. He said upon inquiring further it came to light that this setup of stockbroke­rs was tired of the waiting and the dissent.

The 15-member stockbroki­ng firms have got a detailed report done with the help of the IFC (World Bank affiliated Internatio­nal Finance Corporatio­n) on the demutualis­ation of the CSE. After the Demutualis­ation Act is passed by the Parliament, the CSE as a company limited by guarantee will be converted to a company limited by shares.

Demutualis­ation of an exchange segregates ownership and management from the trading rights of the members of an exchange. In due course, the demutualis­ed stock exchange itself may be listed, and its shares are traded on the stock exchange.

Demutualis­ation of the CSE was made possible with the SEC Act and it will enable the exchange to transit from a mutual associatio­n of exchange members operating on a not-for-profit basis to a limited liability, forprofit company, accountabl­e to shareholde­rs which would also provide them access to capital that can be used both for investment in new technology and other developmen­t initiative­s.

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