As the Compliance Officer in a stock-brokering firm in Sri Lanka, I have the unenviable task of having to force sell client shares in a market that has no buyers.
The forced selling has come about due to various changes instituted by the SEC in conjunction with the CSE that have to do with no longer granting credit to clients, a practice in the past, which in the determining of the SEC no longer constitutes a business activity the stock broker should engage in. In their opinion a margin provider should perform this service and this should be outside the remit of the stockbroker, who is governed by the rules of the CSE and SEC.
While these noble ideals are good in theory, it is the small investor in an illiquid market that gets massacred in this scenario. However much a stock broker tries to dissuade a small investor in purchasing highly dubious retail stocks that seem to go up and down without any rational reason, these very same investors feel that it is the only way they can make money, a very wrong assumption in my view.
The small investor (and I am generalizing here as there are many exceptions to this rule) is not very savvy and is prone to be misled, sometimes by brokers, but most often by other small investors full of myths and rumors of shares and their expected performance. I have had the misfortune of having to deal with many in the latter category, and trying to persuade them to dispose of shares at a loss, as in my view (and later proved correct) that they would fall further was something they were unable to stomach saying the reverse would happen if I forced sold their shares.
It saddens me to have to deal with this sort of client who in a market where the big boys are making billions and millions of tax free money to live the life of kings in Sri Lanka, are losing their shirt on these theories of theirs. Even worse they don't seem to learn from recent lessons where they have got burnt, not realizing that those unable to or not big enough to manipulate the market should only hold value stocks that will go up. The big boys are manipulating the market daily with no one even getting pulled up by the regulators who are totally impotent in their tasks.
I am and have been trying to safeguard the interests of the small shareholders, but find the regulator is their worst enemy, second being the big player, manipulators who due to the low level of liquidity, manipulate shares up, and the sucker retailers follow the pied piper right into the lake and drown, because the manipulator dumps his low cost shares at a high price on the unsuspecting small guy who gets slammed and crushed and barely comes out alive, only to get suckered again.
No wonder then that our voter gets the same treatment from the unscrupulous politician who lies and hoodwinks to get the votes, and continues to do so, as the elector makes the same mistake time and time again, as he is also a sucker and glutton for punishment.
Tell me of a candidate who has been elected if he speaks the truth!! We just like to hear and believe lies, but here I digress from my original purpose, and hope and pray we can educate the small investor in the virtues of long term value investing.
I earnestly hope that both the CSE and SEC realize that they are driving the small investor away despite all the talk to the contrary, as they are totally ignorant of what it takes to safeguard the small investor. If only they really know what has happened to the small investor in the past 6 months, they would have acted differently. But then again what do you expect from bureaucrats warming more and more chairs not earning their keep in this economy!!!
Is this the answer - how to combat CKDU?
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