SEC of Sri Lanka and CFA Society Sri Lanka continue to advance capital market governance standards

As CFA Society Sri Lanka counts down to the ninth annual CFA Capital Market Awards scheduled to be

Securities Exchange Commission Sri Lanka PC Chairman Viraj Dayaratne

held in June this year, it takes stock of the myriad of stakeholders - including industry regulators who are part of the flagship event, which recognises and rewards professionals who have established benchmarks for the advancement of domestic capital market participants.

In the past, the Society has had the opportunity to work closely with the Securities and Exchange Commission of Sri Lanka (SEC), which acts as the regulator of the local capital markets. This includes engagement on several notable projects, particularly in the governance sphere. 

As the premier professional body representing investment professionals in Sri Lanka, CFA has been a powerful voice on local advocacy issues such as drafting new regulations, corporate governance and setting standards of best practice. To this end, CFA Sri Lanka leverages its relationship with the SEC, in discussing key industry issues and providing views and recommendations to improve the development and governance of the capital market.

Some of its early efforts include guidance to establish an ‘Office of Pension Reforms’ in 2002 and in 2009, becoming the Global Investment Performance Standards (GIPS) sponsor for Sri Lanka. In 2010, catering to a request made by the SEC’s Financial Services Academy, CFA Society Sri Lanka developed an Ethical Framework and Best Practices in Professional Conduct to be used in its Certificate in Capital Markets program. 

Furthermore, in 2016, CFA Society Sri Lanka tied up with the SEC to hold annual GIPS training events to educate fund managers on implementing GIPS. CFA’s public seminars have also covered a wide range of topics encompassing regulatory matters, governance, and capital markets, in collaboration with the SEC.

Some of its more recent efforts include advocating for timely corporate governance regulations, for a higher level of effectiveness among Independent Non-Executive Directors and for the adoption of environmental, social and corporate governance (ESG) practices among listed entities. In September 2021, the SEC introduced a new set of governance standards, including the recommendations of CFA Society Sri Lanka which were approved for listed equities, further highlighting the positive impact of the Society’s advocacy undertakings. Commenting on recent developments in the capital markets industry, SEC Chairman Viraj Dayaratne says: “The CFA Society has been keen to develop the capital market in Sri Lanka and provide whatever assistance possible in that regard. We are happy that they have shown an interest and taken steps towards contributing to the market, along with the regulator, the Securities and Exchange Commission, as well as the Colombo Stock Exchange with the idea of bringing in new regulations.”

He also states that “there is an emphasis now on better corporate governance amongst listed companies. Moreover, creating financial literacy is a vital need as far as Sri Lanka is concerned, so that’s an area that requires more attention. I’m happy to note that CFA has shown interest in taking steps to improve financial literacy.”

“Last year, we introduced a REITs framework. But it’s not just a case of facilitating it; you need to create awareness and showcase the advantages of REITs,” Dayaratne asserts.

SEC underscores role of CFA Capital Market Awards in uplifting investment research standards

The SEC Chairman is of the view that the CFA Capital Market Awards is of immense service to the capital market adding: “Whether it is with the work done by the stockbrokers, listed companies or the unit trust industry, collectively there are steps that have to be taken in order to improve the standards in each of those disciplines. And competition will ensure that standards are improved.”

When it comes to the current investment research standards, Dayaratne maintains that while engaging in research is important and it is equally important that such research material is made available. Moreover, high-quality investment research would provide the investing public with the much-needed confidence as well as a sense of security, as far as their investments are concerned.

Looking ahead, the SEC Chairman opines that the CFA Society can take further steps - on its own or together with other stakeholders - to increase financial literacy, create more awareness amongst the investing public and improve the standards of the industry.

He concludes: “CFA is a highly regarded qualification and we’re happy to see the numbers increasing in those who qualify. Greater emphasis is required on the importance of the qualification and how those with it can contribute to the capital market and financial market as a whole.”