SEC to amend its Act

By Dinali Goonewardene

The Securities and Exchange Commission (SEC) is seeking to amend the SEC Act to align its governance and international co-operation framework with International Organisation of Securities Commissions (IOSCO’s) objectives and principles of regulation. The SEC recently called for comments on the proposed changes to its governance structure where the finance minister may, through an order published in the Gazette, remove an appointed a member of the SEC from office on grounds stipulated in the act and appointment as member of the commission is to be subject to clear criteria and grounds for disqualification.

The SEC invited comments on the proposed amendments to the SEC Act which will allow it to share information and documents obtained in the course of investigation with other regulatory agencies in Sri Lanka;

IOSCO has been promoting compliance with IOSCO MMOU since it was endorsed by the president’s committee in 2002 trying to increase the level of enforcement related co-operation and information exchange between its members. IOSCO’s effort in this area were also supplemented by the development of guidelines on carrying out joint cross-border investigations moving a step beyond mere exchange of information, the SEC said in a notice on its website.

The new provision will enable the SEC to seek assistance from other regulators to investigate cross border offences and ensure that the SEC is able to reciprocate when receiving a request from IOSCO members. In this regard, it is also important for the SEC to be able to refer complaints or other offences, which falls outside its jurisdiction to other domestic regulators. When it does so, the SEC should be empowered to share information which it has gathered in the course of its investigation with other regulators to facilitate their investigation.

The proposed amendment to the SEC Act will introduce new subsections and will provide additional criteria which the finance minister will consider before appointing a person as a member of the commission.

These criteria are that person’s probity and standing, and likelihood of any conflict between the interests of the commission and any interest which that person has or represents.  

The new subsection will provide circumstances which will disqualify a person from being appointed or remaining as a member of the commission. A person will be disqualified if he is or becomes a Member of Parliament, a member of any provincial council or any local authority, a director of an entity under the supervision of the commission or is involved in any activity which may interfere with his independence in discharging his duties.

A new sub-section which provides clear criteria for the removal of a member of the commission by the Minister has also been drafted. A member may be removed from office by the Minister if he becomes of unsound mind or incapable of carrying out his duties, if he is guilty of serious misconduct in relation to his duties or if he is absent, except on leave granted by the Minister in the case of the chairman, or by the chairman in the case of all other members, for three consecutive meetings.

New provisions will be drafted in the SEC Act to empower the SEC to share information with domestic regulators including providing domestic regulators with documents and statements which SEC has recorded during its investigation to facilitate investigations by other domestic regulators, provide assistance to investigate into an alleged breach of legal or regulatory requirement which an IOSCO member enforces.

The Securities and Exchange Commission is seeking the views of the public on the proposal to modernise the Securities and Exchange Commission of Sri Lanka Act No. 36 of 1987. The comments received would be considered by the SEC on or before 1 March 2012, it said.