Former Director-General of the Securities Exchange Commission (SEC), Arittha Wickremanayake says that there is a serious lack of understanding as to why insider trading is considered to be an offence.
Addressing the recent TISL Sambhashana discussion on ‘Insider trading in the Stock Market’, he said that recent scandals have clearly highlighted that whilst people like the idea that there is a scandal, they don’t really try to understand why it is dangerous, and the public interest in stopping it. “So after the excitement is gone, usually after about two weeks, no one cares to follow it up. This gives the violators the confidence that they can engage in more and more of such activity without having to pay for it,” he said.
A packed audience at the OPA auditorium showed a keen interest in the subject . After a short welcome address by TISL chairman M D A Harold, AFP Bureau chief Amal Jayasinghe taking over the role of the moderator, initiated the discussion.
Continuing, former SEC DG said that although there is a dangerous perception that regulation is a cure for every market illness, it is not so. Adding that regulation merely provides a basic framework for facilitating operations of markets, he pointed out that in Sri Lanka, the object of the SEC is to create and maintain an orderly and fair market, and to regulate it and to ensure rthaat professional standards are maintained.
Parliamentarian Sunil Handunetti said that although the government boasted that the Colombo Stock Exchange would be the Asia’s fastest growing market, recent events have shown that it is far from it.
He blamed the government for manipulating the share market by investing government pension funds like the Employees Provident Fund (EPF). Stressing that the government was responsible for the public funds, which are life-long savings of innocent people, he pointed out that instead of protecting these funds, the government is misusing public funds to inflate the capital market to create a false illusion in the minds of the people.
He said that insider trading activities have an effect on the small investors who use the limited resources hoping to earn some additional income. The fluctuations are caused by a small group of people who have vested interests and those who suffer would be the small scale investors, who have invested having confidence in the share market only to realize that they have fallen into trap of the big fish.
Parliamentarian Eran Wickramaratne looking at the problem from a banker’s point of view, said that the crisis in the market has not caused a problem to a certain class of people or a certain area of the country but it is impacting on every individual living in this country.
He questioned the credibility of the government when the annual report of the EPF 2010 was only being released after 17 months and there is no indication of the report for 2011 is going to be released in the near future. “Where is the credibility and the relevance of the information,” he asked. Referring to the lack of transparency of the information he said that because nowhere in the report does it contain any information about the listed companies that the fund has invested in. The need to appoint a Parliamentary Select Committee to investigate the happenings of the stock market because of the incidents that have taken place in the past has been brought up in Parliament, he said..
He wanted to know why the Central Bank does not take any action against those who engage in insider trading. Why is the Central Bank putting these issues under the carpet without bringing them to light? , he asked.
Emphasising on the need to protect the funds of the employees, he pointed out that the government does not have a right to misuse this money for their personal glory. The employee unions should be made aware and steps should be taken to protect the wellbeing of all employees. He insisted that the focus should be in protecting the underprivileged sections.
The panel fielded a lot of questions from the audience and an interesting and thought provoking discussion followed.