SEC gives more flexibility on broker credit

Tuesday, 17 July 2012 01:10 - - {{hitsCtrl.values.hits}}

The Securities and Exchange Commission (SEC) yesterday announced greater flexibility on broker credit, following recommendations for same from the capital markets.

The move follows discussions between SEC and the Colombo Stock Exchange on 12 July where many issues pertaining to capital market figured including management of credit by brokers to their clients.

“After much deliberation, the Commission decided to allow brokers more flexibility in managing their credit. Further it was noted that the CSE should create awareness amongst the brokers on the risks involved in such flexibility,” the SEC said in a statement.

Having considered recommendations from the CSE, the SEC issued the following directive as an “interim measure”.

a) Debtors between T+3 -T+30 calendar days to be deducted if cost less provisions made for the period is greater than market value;

b) Debtors over T+30 calendar days to be deducted at 50% of the cost less provisions made

c) Debtors over T+120 calendar days to be deducted at 100% of cost less provisions made.

SEC also said that all licensed stockbrokers will be required to strictly ensure the accuracy of the details of debtors represented in the net capital computation to the SEC and CSE and the maintenance of the minimum net capital requirement as stipulated in the stockbroker rules.

“Any failure by stockbroker companies to strictly comply” with the new directive will result in action being taken against such broker.

The latest support to brokers and their clients is likely to be welcomed though it comes when the year to date negative return at Colombo Bourse is at near 20% in terms of ASI and over 17% as per the MPI. The market’s value has lost near 16% year to date as well.

Yesterday the market opened the week on a positive note but the lacklustre performance of the Bourse continued. The benchmark ASI ended the day gaining 0.26% (12.58 points) over last Friday’s close whilst the MPI closed in the opposite direction losing a marginal 0.08% (2.21 points). Turnover was Rs. 196.9 million with LAUGFS Gas nonvoting, NDB and PC House Holdings being the top turnover generators of the day.