History repeats; Tilak to quit SEC?
In spite of the commendation the Securities and Exchange Commission (SEC) Chief Tilak Karunaratne received from the Committee of Public Enterprises (COPE) last week for ‘excellent performance’, the regulator is believed to be under extreme pressure, which may eventually lead to his stepping down, Mirror Business reliably learns.
According to sources close to SEC, the pressure is mounting on Karunaratne, who has taken a tough regulatory stance against market misconduct and revived investigations which were in the backburner since he assumed duties as the SEC Chairman.
“He is extremely frustrated as there is little help from those who are supposed to back him in doing the right thing. It also seems that the decision was prompted by his unwillingness to cause difficulties to those who appointed him to this high office,” a SEC source on the grounds of anonymity said.
According to him, Karunaratne is most likely to handover his resignation during the early part of this week and, the resignation letter, in detail, will explain the reasons for his decision to quit SEC.
Certain high net worth investors and some stockbrokers have taken arms against the SEC, specially against Karunaratne, alleging that their regulatory actions have created a ‘fear psychosis’ among investors which has kept both big and small investors away from the Colombo Stock Exchange (CSE) alike.
Though these influential investors were able to arrange a meeting with the President, who is also the Finance Minster and the market stakeholders including the SEC a few weeks back, it bore no material outcome, except a couple of followup meetings between the market stakeholders and the Treasury Secretary P. B. Jayasundara.
“During any of these meetings, the SEC was neither ready to bring the investigations it was carrying out to a halt nor alter its position on broker-credit. This has agitated many stock brokers and influential investors who are highly connected,” a stockbroker who attended these meeting said.
Relaxation of credit rules has been a sticking point between the brokers and the SEC as some stockbrokers wanted fewer regulations on credit they provide to their clients, though certain brokers stressing extensive credit may lead to systemic risks.
“With the SEC trying to take actions against market misconduct, sanity returned to the Colombo bourse together with foreign investors. To-date, foreign inflow to the market has topped Rs.26 billion. A change in the top position of the regulator can certainly unsettle this trend,” an independent market analyst told Mirror Business.
Bowing down to pressure exerted by powerful investors during December last year, the then SEC Chairman Indrani Sugathadasa resigned from her post claiming it was to ‘uphold her principles’.
“It will be worrying to see the same fate befalling on the person who succeeded Sugathadasa, who also tried taking correct measures for market development. This clearly shows that how powerful the big investors who operate in the bourse are,” a senior economist who preferred anonymity said.
“In recent news reports, it was reported quoting COPE Chairman D.E.W.Gunesekara that COPE would support SEC to the hilt. This would be a good time for them to step up and protect the independence of the SEC,” he added.
Meanwhile, following the likely resignation of Karunaratne, the fate of the acting Director General of SEC, Dr.Harendra Dissa Bandara also hangs in the balance, sources said.
According to them, Karunaratne’s attempt to make Dissa Bandara the SEC Director General has so far failed and this also has contributed towards Karunaratne’s decision to step down.
As per the sources, Dissa Bandara is likely to be removed from his position following Karunaratne’s resignation.
Those tipped to be the new Director General are present Director Investigations at the SEC, Dhammika Perea and Sri Lanka Tourism Development Chairman Nalaka Godahewa.