The FT of June 20th highlighted the fact that the SEC has sent out letters to people they have selected who could possibly be involved in driving up the shares of two companies, namely East West and Swarhamahal Financial. This is based purely on them having purchased shares at a lower price and sold at a higher price, and made a minimum profit predetermined by the SEC. The included a politician, to show that no one was immune from being questioned. The letters are accusatory of illegal activity and in no sense should be sent to innocent shareholders, just because they have the right and immunity from prosecution for mental anguish!!
SEC is permitted within the powers vested in it by act of parliament to question possible violators and obtain proof before deciding upon legal action. However when a large number, perhaps over 1000 have received such letters, it spooks a number of LARGE investors who made money recently on trading in shares.
The SEC, though its Chairman, recently appointed to clear the mess, may be a sensible man who is out to clean the shop, is run by a bunch of incompetents who have no clear idea of how they should operate. After all if they had any idea, our market would not be in such a mess!! It was clear that there was manipulation on a large scale that did not lead to anyone being pulled up. It is therefore WRONG to pick on a large number of people and send a threatening or accusatory letter to mostly (99%) innocent people so that they may catch the culprits.
I have also been called into advise these recipients and I have told them in no uncertain terms, that they have nothing to worry about, as they have not been party to upward and downward share movements as they have given their brokers complete discretion in how their accounts are handled. They must just turn up at the enquiry and just tell the truth and not be bothered by some lackeys asking questions, which even they do not know why they are asking! They only act as human machines, asking a bunch of standard questions and will write your answers to them before taking any further action.
It was interesting that after the FT article was published, the SEC was quick to send a reply to the FT, which was published in full by the FT of June 21st 2012. First I shall allude to the tone of the letter by the SEC, to the front page FT article of the previous day, which I believe says it all as to the attitude of a responsible financial newspaper, doing its job.
They allude to the FT article as one that creates fear psychosis in the minds of the investors. In fact the tone of the SEC letter is one that does exactly the same, as it has gone to over 1000 of the most active investors in the country, a sure sign of them not wanting to play the market if this is how the regulator acts and reacts to news!!!
Further, and I quote from the letter by the SEC to the FT “It may be a matter of interest to note that in terms of Section 51(1) (c) that any person who willfully obstructs any member of the Commission or an Officer of the Commission in the performance of its duties under the provisions of the SEC Act, shall be guilty of an offence and the SEC will not hesitate to pursue action under this Section if the need arises.” This IS AN unwarranted veiled threat aimed at the publication for its reporting.
Further the letter goes on to say “Daily FT………. to refrain from commenting or furthering the objectives of persons who are deliberately setting out to obstruct the functioning of the SEC by bringing disrepute to the Commission, its Members and staff.” This is preposterous as the FT is tasked as a responsible publication with an independent editorial policy of presenting view points, not necessarily in accordance with what is acceptable to some who read it be it the general public or within the SEC, but which collectively instructs a financially astute readership to come to their own conclusions, based on what is written.
I would not hesitate to call on the SEC not to be like the Government which presents a biased viewpoint of their own, and takes to task those who disagree with their warped opinions. The SEC must keep its independence and perform their duties impartially and any act on their part that seems to veer from that must be pointed out to them, so they can correct their position to one that is impartial, without taking umbrage as to a very rational opinion that has been expressed, to which I subscribe to.
It is important therefore that the SEC take a leaf from this opinion, and be careful not to kill the CSE EGG forever, as that is what they are about to do by committing Institutional ‘Hara Kiri’, at the cost of a unthinkable damage to the Sri Lankan Economy. They have no idea the importance of the task they have been entrusted with and act as ‘brainless nincompoops’ when confronted with constructive criticism. Let us hope they learn and go forward to clean up the mess they have PERMITTED.
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