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Tuesday, 14 February 2017 00:00 - - {{hitsCtrl.values.hits}}
The accounting profession is up in arms over the proposal to remove their representation in the Securities and Exchange Commission (SEC).
In the proposed draft of the consolidated and amended Securities and Exchange Commission Act No. 36 of 1987, the appointment of the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) to the SEC as an ex-officio commission member has been excluded.
CA Sri Lanka (or ICASL), the national accounting and auditing standards setter, has been an ex-Officio Commission member of the SEC since its inception. The other ex-Officio Commission members are the Deputy Secretary to the Treasury, Central Bank Deputy Governor and Registrar of Companies.
In the new draft, ex-officio status of these three is intact though of late some of them have not been consistent in terms of attending crucial commission meetings.
Another amendment is the registration of auditors who audit accounts of market institutions, market intermediaries and listed public companies and ensure its proper conduct.
Official sources said that the move to remove the slot for CA Sri Lanka President is based on concerns of conflict of interest as well as criticism within some circles that auditors were not doing their job effectively.
However, the accounting profession disagrees on the basis for the new moves.
They said the SEC Act sets out the conduct of a Commission member in the event of any interest directly or indirectly on any matter dealt by the capital markets regulator.
It states: “A member who is directly or indirectly interested in any decision that is to be taken on any matter by the Commission shall disclose the nature of such interest at the meeting of the Commission where such decision is being taken. The disclosure shall be recorded in the minutes of the meetings of the Commission and such member shall not take part in any deliberation or decision of the Commission with regard to that matter and shall withdraw from such meeting while such deliberation is in progress or such decision is being made.”
“If the concern is on the CA Sri Lanka President of a possible conflict of interest then the SEC Commission members have included practicing lawyers who also appear on various commercial cases. Is the SEC turning a blind eye on lawyers?” asked one senior accountant.
It was pointed out that CA Sri Lanka is a professional body and the Presidential representation and opinion was important in the regulation of the capital market.
“It is imperative that CA Sri Lanka must be part of the deliberations at the SEC to ensure its input is given due consideration in the regulatory function of the SEC,” they said, adding that the removal of the ex-officio position demonstrates complete ignorance of the interplay of reporting standards with the development of capital market.
The move to require auditors to register with the SEC has also come under fire. The proposal means another layer of unnecessary regulation whereas at present the Sri Lanka Accounting and Auditing Standards Monitoring Board has an oversight role on auditors apart from mechanisms within CA Sri Lanka as well as in the hands of shareholders.
“It appears there is a vendetta against the professional accounting community,” another chartered accountant claimed.
Capital market analysts are of the view that a greater discourse and saner counsel will prevail on proposed amendments. The deadline for public comments on the draft is 15 February 2017 though the document was made available on the SEC website only on 20 January.
Some have gotten a sense that the amendments are being rushed through in a bid to expedite the rollout of $ 250 million in Asian Development Bank funding for capital market development.
The proposed draft of the consolidated and amended Securities and Exchange Commission Act No. 36 of 1987 is available online at www.sec.gov.lk/?p=10143.
