Trading of BASEL III compliant debentures limited to qualified investors

Tuesday, 26 December 2017 02:08 - - {{hitsCtrl.values.hits}}

Trading of BASEL III compliant-debt securities issued by banks will be limited to qualified investors as recommended by the Securities and Exchange Commission.

The CSE said that the SEC has approved the amendments to the Automated Trading System Rules which facilitate the trading of BASEL III-compliant debt securities issued by commercial banks and specialised banks licensed by the Central Bank.

Those specified by the SEC as qualified investors are a commercial bank, specialised bank, a mutual fund, pension fund, employee provident fund or any other similar pooled fund, a venture capital fund or company and private equity company, a finance company licensed by the Central Bank, a company licensed by the Central Bank to carry out finance leasing business, a company licensed by the Insurance Board of Sri Lanka to carry on an insurance business, a corporate (listed or unlisted) which does not fall under the above categories and is incorporated under the Companies Act, an investment trust or investment company, a non-resident institutional investor and an individual with an investment of Rs. 5 million.

As per the amended ATS rules, any trade executed on BASEL III-compliant debt securities where the buyer is not a qualified investor will be cancelled by the CSE and the buying broker firm must pay the CSE a trade cancellation administration fee of Rs. 10,000 or 0.005% of the total value of the transaction, whichever is higher, subject to a maximum of Rs. 25,000.

CSE said broker firms are required to take necessary measures to restrict investors from placing orders for BASEL III-compliant debt securities using an internet trading facility. Only qualified investors should be allowed to place orders for BASEL III-compliant debt securities through the internet trading facility.

Broker firms are required to flag ‘Qualified Investors’ in their respective Broker Back Office System and Order Management System in order to restrict the order submission to BASEL III securities “qualified investors”.

Secondary trading should also be restricted to and between qualified investors.

The amended ATS rules to facilitate trading of BASEL III-compliant debt securities are available on the CSE website www.cse.lk.