SEC grills brokers, fires letters to investors

Causing mixed reactions in capital market, watchdog SEC yesterday grilled several brokers, with more to follow, in addition to firing letters to investors as part of its investigations on what is perceived as suspect trades.

At least three brokers – Lanka Securities, Nation Lanka Equities (formerly Ceylinco Securities) and Arrenga Capital – were questioned by SEC officials. A few more are to be put through the same exercise. Among investors who had got letters asking for written submissions to SEC queries is PC House Chairman S.H.M. Rishan.

Grilling of brokers had centered around their trade of illiquid shares instead of focusing on fundamentally-sound stocks.

For some of the investors the query had been whey they had bought particular stock/s and sources of funds, etc.

Some investors and brokers who got wind of grilling as well as letters seeking explanation were furious over the SEC’s action as well as the nature of the questions. The SEC grilling is despite having a state-of-the-art surveillance system installed in the market.

However, others said questioning as well as seeking information was part of the standard practice adopted by regulators globally to assess whether or not further action was required.

The SEC action apparently follows after it appeared to have been irked by heavy trades as well as the extraordinary rise of illiquid and penny stocks. Some market participants have blamed overregulation for the downfall of Colombo bourse, which is currently offering negative return.