Credible capital market promotion

Monday, 21 October 2013 00:00 -     - {{hitsCtrl.values.hits}}

The Securities and Exchange Commission (SEC) has found novel ways to spreading the word on investing in Sri Lanka’s capital market – donating money to Tharunyata Hetak. Tharunyata Hetak, which as everyone knows is under President Mahinda Rajapaksa’s son MP Namal Rajapaksa, was given Rs. 5 million to conduct awareness programs. The SEC defended the move, insisting that even though it was very much a political organisation, Tharunyata Hetak given its extensive reach was good enough to have their proposal seriously considered. The handout has raised questions about the transparency and ethics of allocating cash for awareness programs and a dialogue on whether evaluation processors in place are adequate. Even though the allocation could have been made in good faith, the fact that it was done to a politically aligned entity raises questions over the SEC’s impartiality. This is crucial in the context SEC’s reputation has often come under the limelight and the new administration has garnered support for some of its recent market development initiatives. The SEC had also given an unspecified amount of money to a private organisation to conduct similar awareness programs. While this could be perfectly justified, it is also important that monetary handouts of this nature be given more transparency to increase confidence in the SEC. In the past months SEC has had mixed reviews, regularly hitting headlines after two heads resigned alleging a “mafia” within the stock market. Former Chairperson Indrani Sugathadasa in particular was quoted as stepping down to protect her principles, a move that raised much concern about the capacity of the SEC to remain independent and work in the best interests of all investors. Thilak Karunaratne too left the regulatory body with his own version of ills. Such shadows over the reputation of SEC continue to dodge the establishment and it would be ill-served to be known as an entity that made decisions on political bias or affiliations. Moreover, it is essential that the budget it has for publicity is used in a manner that gets it the maximum returns. SEC officials have pointed out that its limited staff is inadequate to spread the word on local capital markets and it needs to outsource these endeavours to other organisations. The validity of this point must be further enhanced by insisting that organisations such as Tharunyata Hetak that take significant chunks of cash should then provide details of how they have been used and how much investment has been obtained from the publicity that they provided. In addition to making sure of efficient use of resources, it will also give SEC a chance to understand its market and cater to it better. Future attempts to provide funding must be based on such independent and transparent evaluation for both the good of capital markets and the SEC’s reputation. More people or in this case institutions with extensive reach championing capital market development are welcome, but the SEC needs to be above board to give credence to collective effort for the better.