SEC, CSE issue new directives to brokers on credit exposure

Monday, 1 February 2021 03:59 -     - {{hitsCtrl.values.hits}}

With unprecedented level of trading activity, the Securities and Exchange Commission (SEC) and the Colombo Stock Exchange (CSE) have issued new directives to monitor credit exposure undertaken by brokers and dealers. 

The SEC action follows its meeting with stockbroker firms in mid-January and CSE has been notified of new directives last week.

1. On a weekly basis, commencing from the week ending 22 January:

The following information to be submitted along with a Declaration made by a Director and the Chief Executive Officer of the Stockbroker Firm. 

The declaration to be submitted within two market days after the end of each week.

i. Debtors and Creditors Age Analyses for the following age categories:

  • T +4 – T+30 days
  • T+31 – T+ 90 days
  • T+91 – T+180 days
  • T+181 days and above

ii. The computation of excess of cost over Market Value for unsettled purchase transactions on an individual client basis

iii. The overdraft position of each Client Fund and Firm Fund bank account maintained by the Stockbroker Firm

iv. A confirmation of the liquid assets less obligations as at the end of each week

v. The adequacy of Client Fund positions to meet the Creditors over T+3 position in compliance with Section 4 – Clients Money of the CSE Stockbroker Rules

vi. Investment Advisor wise report of transactions executed on behalf of Discretionary Accounts in respect of each client


2. On a monthly basis, commencing from week ending 22 January:

i. A Declaration made by the Compliance Officer of the Stockbroker Firm confirming the Firm‘s compliance with Rules of the CSE on Minimum Capital Adequacy Ratio, Minimum Liquid Capital Position and the Guidelines on best practices for the Stockbrokers communicated via CSE Circular No. 02-01-2021 on 22 January. The said Declaration to be submitted within two market days after the end of each month

ii. A list of Discretionary Accounts, indicating client-wise debtors over T+3 balance and the portfolio value of each client, along with the percentage of total portfolio value in such Discretionary Accounts against the total portfolio value of all clients of the Stockbroker Firm as at the month end

iii. Client-wise portfolio value adjusted for Value at Risk (VaR) margin as at the month end

iv. Client-Investment Advisor ratio (number of clients to each Investment Advisor) as at the month end


3. Additional Information on Debtors Over T+3 Balances of Specific Securities:

In addition to the aforesaid, please forward the following reports/analysis to the CSE in relation to the securities set out below as at end of each week, commencing from 29 January. The said reports/analysis to be submitted to the CSE within two market days after the end of each week.

Companies are:

  • Browns Investments 
  • LOLC Holdings 
  • Expolanka Holdings 
  • Industrial Asphalts (Ceylon) 
  • Sierra Cables 
  • BPPL Holdings 
  • Piramal Glass Ceylon 


4. Any change to the above list of Securities will be duly notified by the CSE

i. A report on the portfolio balances of the securities set out above held by the clients of the Stockbroker Firm who are having a Debtors Over T+3 balance as at the end of each week

ii. For each of the clients set out in Item I above, the percentage (%) of credit extended as at end of each week in respect of each of the abovementioned securities against the total Debtors Over T+3 balance of the respective client

iii. Percentage (%) of credit extended to all clients of Stockbroker Firm in respect of each of the above listed securities against the Firm‘s total Debtors Over T+3 balance as at end of each week


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