Subject:Report from the Reserve Bank of India
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Date:Thursday, March 15, 2018, 9:46:20 AM GMT+5:30
Dear Mr Vajira Gunawardene,
I write to you in your role as the Director General of the SEC. The framework and regulation which you create will make or break the Sri Lankan capital markets. Currently the public perceives the regulator to be too stringent. This is an unfair characterization as the regulator must act to clean up what has been a systemically corrupt capital market in recent decades. It might benefit your institution however to liberalize a certain part of the market to quell any criticism.
Attached herein is a report from the Reserve Bank of India looking into the reform of its corporate debt market. India with its implementation of GST and other sweeping financial reform has pivoted its growth trajectory in an upward direction. Sri Lanka is currently richer than India and far better regulated. If it is that you want to keep it this way and not become the Director General of the SEC when India overtakes Sri Lanka in terms of regulation it might make sense to mirror their set of reforms. To be overtaken would tarnish your legacy and affect the societal standing of your family
I draw your attention to the highlighted reforms of this report which call for improvements to their electronic platform. Sri Lanka currently does have an electronic platform to trade corporate debt, but this is kept closed to the retail investor through an archaic regulation. Listing corporate debt in Sri Lanka is quite difficult and expensive. As the listing requirements are so high firms should also be allowed to reissue bonds so long as they are in conformity with the existing regulations.
Current critics of the regulatory body highlight certain issues. The current investigation into Indra Silva and his trade with BOC are currently being undertaken by the SEC with no assistance by any other law enforcement entity. They state that this is a huge overreach on the part of the SEC. Critics also point to the failing of two primary dealers namely Entrust and Perpetual Treasuries. Both these firms should have been prevented from carrying on their activity by the regulatory body. First Capital Ltd which is an oddly structured firm in terms of ownership is another cause for concern in the eyes of the critic. Reading their annual reports, one sees investments into commercial paper and an equity stake into Kanrich Finance (a Micro Finance institution). The recent sale of Janashakthi General Insurance is also not a sign of strength.
I wish you the best of luck as a regulator. It is my understanding that a certain activist group is planning to RTI the SEC in order to obtain reports pertaining to the opening of accounts and subsequent investments made by nations targeted by the CSE post its investor forums. Allowing online trading via ATrad for retail investors might just be good press for you and your organization.