The new Securities and Exchange Commission Act to regulate the stock market in keeping with current international best practices is to be presented to Parliament next week.
The new law, which will replace the Securities and Exchange Commission of Sri Lanka Act No. 36 of 1987, has been published in the Government Gazette ahead of being tabled in Parliament.
The new Bill enhances the powers of the Commission and auditors and deals comprehensively with market misconduct, with fines for those violating the law ranging from Rs. 1 million up to Rs. 25 million and jail sentences between five to 10 years. It also sets strict rules for market intermediaries.
The Bill provides for the deterrence and enforcement of action against all types of market manipulation, including false trading, market rigging, securities fraud and insider trading, with a view to establishing a fair, orderly and transparent securities market.
In addition to establishing the Securities and Exchange Commission (SEC), the objectives of the Act are to create, maintain and regulate a fair, orderly, efficient, and transparent securities market, to protect the interests of local and foreign investors, and to ensure the maintenance of high professional standards in the provision of services in relation to securities markets.
The Bill also regulates the issue of securities by way of public offers to ensure the disclosure of financial information by listed public companies; mandates auditors disclose financial irregularities of listed public companies; allows for the licencing of market intermediaries and registering of their representatives; and allows for the protection of assets of the clients.
The Bill also provides whistle-blower protection prohibiting an employer from discharging, terminating, demoting or harassing an employee on account of them having provided information to the Commission concerning violations or potential violations of this Act. Such employees may include director, partner, chief executive officer, chief financial officer, company secretary, internal auditor, or any other employee.
The Commission will have powers to grant a reward to a whistle-blower who is the first to provide such information which leads to the successful prosecution or any other sanction by the Commission against a person for a contravention of the provisions of this Act.
Cabinet approval was granted to a proposal by Prime Minister Mahinda Rajapaksa, who is also the Finance Minister, to present the Bill to Parliament.
(FT)