SEC: Catch the manipulators
1 March 2015
Until this week, there had been absolute silence in the Colombo stock market over the dismal happenings in the past where alleged mafia-like traders controlled the market and also certain officials at the Securities and Exchange Commission (SEC). It is painstakingly clear to all and sundry – regular investors, brokers, analysts and the culprits themselves – how pressure was brought to bear on two former chairpersons, Indrani Sugathadasa and Thilak Karunaratne forcing them to resign in disgust. These two principled individuals, rather than bow down to corrupt traders and businessmen who used the stock market to launder black money, chose to quit. Such was their integrity that Ms. Sugathadasa, wife of former Presidential Secretary Lalith Weeratunga, was asked to continue as Chairperson of the Insurance Board while Mr. Karunaratne was persuaded to return to the SEC and clean up the place.
However since the latter’s return to the SEC, there has been very little pronouncements or revelations about the misdeeds of the past or how investigations against the corrupt were either delayed or ‘cannot proceed due to lack of evidence’ or something on those lines which was a ruse used to close the files. While there is concern over the inordinate delay in the SEC taking the bull by the horns and proceeding speedily to catch the culprits, the reason for the slow process must also be given due consideration. While Mr. Karunaratne has shown reluctance to speak to the media, until he has – as he says – something tangible to talk about -, the corridors of the SEC still reverberates with some of the favourite officials of former SEC chairman Nalaka Godahewa continuing in their positions and no proper enforcement mechanism in place. Getting rid of them is not easy for a Government that has been elected to do the right thing and not hound its opponents. The new SEC commissioners are now seen putting strong governance and ethical guidelines in place and at its first meeting recently, decided to advertise for a Director General with more advanced qualifications. This position has been vacant for a long time. The present acting Director General is Dhammika Perera, a long-standing employee of the SEC, who is also likely to apply for the post even though the commission chose not to appoint him for reasons best known to the new administration. At a ‘bell ringing’ ceremony at the Colombo Stock Exchange on Wednesday attended by a visiting Malaysian dignitary, Mr. Karunaratne and Economic and Planning Deputy Minister Harsha de Silva, brokers – who were in tow with the former hierarchy at the SEC and probably involved in manipulating stock prices – were seemingly jittery, according to our reporter. They were even more uncomfortable when Mr. Karunaratne and Dr. De Silva referred to the sordid happenings in the market not too long ago. During the week too, the Prime Minister reportedly told a meeting outside Colombo that some businessmen would be probed over their irregular dealings in the stock market. Some years back, the power of a group of new-rich investors, who benefited under the Mahinda Rajapaksa administration and who were allegedly behind stock manipulation, was clearly seen when they met the former president and persuaded him to revamp the SEC to make it ‘more market friendly’, which was one of the reasons claimed as to why the market had collapsed. Their definition of ‘market friendly’ was to turn a blind eye to irregular deals on the bourse! Mr. Karunaratne was eased out and cronies brought in, not only looking the other side but also putting all the investigations on shady deals on the back-burner or declaring there was no evidence to proceed. Attempts to form small investor associations to protect independent minority shareholders also failed as efforts were made by manipulators to infiltrate these groups. Much of the foreign money that came into the stock market, cheered by the authorities as “foreign investors” convinced of the sound policies of the then Government, was partly black money by local investors re-cycled through foreign-interest groups. Money laundering took place not only on the stock market but in many deals outside where powerful business interests close to the regime used ‘friendly’ foreign companies to recycle the money for Sri Lankan projects. Using local PR agencies, these ‘foreign’ investors got high-profile publicity through media conferences and media releases! With Mr. Karunaratne’s first public remarks this week after assuming office as SEC chairperson with a mandate to clean up the regulator, protect all investors – mainly the small ones who are at the mercy of big-time manipulators -, and genuine foreign investors who are concerned about inconsistent policies (particularly on taxes), transparency and clear-cut rules and regulations, hopefully the stalled investigations will re-start in the next few weeks after a new Director General is appointed and a reliable probe team put in place. The Government has been dogged by delays in bringing alleged crooks to book and testing public patience beyond reason. While the delay could be attributed to the authorities trying to put together evidence to fix the perpetrators beyond any reasonable doubt, the special inquiry unit set up needs to work speedily to file charges in at least 2-3 high profile corruption cases before the next poll. The week- to-10-day gap between the conclusion of an election, induction of a new President and Prime Minister, and the appointment of a cabinet of ministers, resulted in many confidential files, documents on computers and hard drives being secretly spirited away by corrupt officials. The new administration was slow in meeting this emergency and taking preventive measures while the continuation of some officials, close to the former administrators, didn’t help. Missing files have stumped investigators, delaying the process, while lack of good forensic investigators to deal with white collar crimes, particularly money laundering, is also a stumbling block. Cleaning up the stables is a gigantic task at institutions like the SEC and deserves the support of the public by coming forward to provide information to nab the crooks and ensure the marketplace is clean and equally protects all investors – big or small. This is the era of whistleblowers.