Brokers admit SEC rules only 20% of the market’s problem

Monday, 28 November 2011 00:00 -     - {{hitsCtrl.values.hits}}

The members of the Colombo Stock Brokers Association (CSBA) have admitted that the Securities and Exchange Commission (SEC) and its rules, especially involving credit, are only responsible for 20% of the market’s ills.

This admission had been made during an emergency meeting between the CSBA and the SEC last week to resurrect the market from its appalling status with year-to-date negative return topping 12% and dwindling activity.

At this meeting the Daily FT learns the SEC has been recommended that brokers’ credit exposure must be increased to two times their liquid capital as opposed to one time at present. However, at least one voice among brokers had suggested 10 times, which nevertheless was cautioned as too extreme.

The SEC officials had inquired whether easing of credit rule would help to boost the sagging market, to which brokers had admitted it was only 20% of the problem and the balance remained unresolved at large.

Brokers had cited non-SEC issues for the current slide in the market. Some included investor concerns over the Expropriation Bill as well as rising interest rates.

The SEC Commissioners are scheduled to meet tomorrow (Tuesday) to assess the latest information on the positive benefits of the previous credit relaxation, if any. After a thorough analysis, the SEC Commissioners are likely to take a fresh decision on whether or not further relaxation is needed.