COPE Report and indemnity provided in Monetary Law Act for members of Monetary Board and CB officers

By Legal Eye

The report of the Committee on Public Enterprises (COPE), which was released on Friday, 28 October 2016 on the so-called Bond Scam, has concluded that there were reasonable grounds to believe that former Governor Arjuna Mahendran had made an intervention or used pressure in the bond transaction that took place on 27 February 2015. 

It has further recommended that the exorbitant gain derived by Perpetual Treasuries Ltd. should be recovered from the former Central Bank Governor and Central Bank officers associated with the transaction.

It is disappointing to observe that the erudite members of the COPE in this widely publicised report, which was under preparation for a considerable time, have not considered or commented on:

(1)The role of the Monetary Board and its obligations in the management of the Public Debt Department. 

Whether the provisions of Section 47 of the Monetary Law Act quoted below for easy reference, which provides an indemnity for the Governor and the staff of the Central Bank, has been given due consideration in the preparation of the report.

(1)No member of the Monetary Board or officer or servant of the Central Bank shall be liable for any damage or loss suffered by the bank unless such damage or loss was caused by his misconduct or willful default.

Liability for false statements in Central Bank accounts, &c. Protection for acts done in good faith, &c

(2)Every member of the Monetary Board and every officer or servant of the Central Bank shall be indemnified by the bank from all losses and expenses incurred by him in or about the discharge of his duties, other than such losses and expenses as the board may deem to have been occasioned by his misconduct or willful default.    

Furthermore, as stated by a COPE member at a news conference, “insider dealing” as provided in the Securities and Exchange Commission of Sri Lanka Act No. 36 of 1987 as amended by Act No. 26 of 1991, Act No. 18 of 2003 and Act No. 47 of 2009 is not an offence under the Monetary Law Act, the Local Treasury Bills Ordinance, Registered Stocks and Securities Ordinance, Exchange Control Act or any regulation made there under, which provide for the issue of Government Securities. 

Hence, the COPE members in their report should have considered the fact that there is a lacuna in the law in relation to taking punitive action, although it is imperative that the persons responsible for ripping off the public through the purported Bond Scam should be penalised and made accountable forthwith.