Brokers propose temporary licence freeze to SEC

The stock broking industry has proposed a temporary freezing of licences to the Securities and Exchange Commission (SEC) of those who are facing financial difficulties.

The proposal, backed by the Colombo Stock Exchange (CSE), has been placed before the SEC for consideration and discussion with the industry. There are 27 members of the CSE, of whom 12 are trading members.  CSE Chairman Ray Abeywardena told the Daily FT that considering the present market and industry challenges, a freezing of licences for a limited period of certain brokers who may be facing financial difficulties has been proposed. “This will enable brokers to stay their business for a defined period to be determined by SEC and CSE,” he added. 

“Support mechanisms when industries are in difficulty are not new and capital markets aren’t alone in this; many other industries in the past have benefitted from incentives or subtle support such as tourism, tea, etc. when the going has been tough. We are not asking for cash or incentives but regulatory support to temporarily suspend the business without losing the license,” the CSE Chairman explained.

Abeywardena said businesses may not be keen to shut down immediately. For shareholders and owners of broking firms, it is a business decision. 

“Usually the tendency is not to put good money when the business is not doing well. If one sees potential to grow, then fresh capital will follow,” he added.