Participants must pay up for Bond scam losses if any, AG informs P’ment

The Attorney General has recommended the recovery of losses by the Government if any from the related parties as a result of the controversial bond issuance. 

The Attorney General was replying a letter received from Parliament seeking guidance and necessary action for the Committee on Public Enterprises (COPE) report.

In his letter to the Parliament, the Attorney General has mentioned the steps taken in response to advice sought by the Secretary to the Prime Minister. 

“The legality of bonds issued by the Central Bank of Sri Lanka since 2008 in the hands of iJ011a fide third parties purchasing same for value, will not be affected by a lack of authority or defect in the procedure in relation to issuing such bonds. The contents of the above COPE Report point to the possibility of several transgressions known to the law, including market manipulation, insider dealing and non-compliance with mandatory procedure. In this regard, civil and criminal remedies may be availed of, particularly in terms of section 21D and section 56A of the Registered Stocks and Securities Ordinance, No. 7 of 1937 as amended,” the AG said.

According to the AG, in terms of section 21D of the Registered Stocks and Securities Ordinance, in the event of the Government incurring any liability or making payment of “any sum due as principal, interest or redemption proceeds with regard to Scripless Treasury Bonds, and where such liability arises or such payment is made in consequence, or by reason of any default of a direct participant or a dealer direct participant, such participant shall be liable on demand by the Government, to indemnify the Government with respect to such liability or payment.”

“Furthermore, a reasonable estimation of damages assessed by a method that could be substantiated before a court of law would be required. In this regard, it would be necessary to provide a precise quantification of the loss suffered by the Government, as also called for by the recommendation at bullet point 2 of page 53 of the above COPE Report. The said quantification should be carried out by the Auditor General’s Department, with the assistance of an independent expert or experts whose evidence can be relied upon in a court of law. 

“In terms of 56A [1] of the Registered Stocks and Securities Ordinance, any person who fails to comply with any provision under the Ordinance or any regulation, order, or direction given thereunder is guilty of an offence,” he added.

“In order to consider the possibility of a criminal prosecution against a particular person or entity being initiated under the aforesaid provision or any other law, an investigation based on a complaint to the Police would be a pre-requisite. In addition to the aforesaid civil and criminal remedies, the CBSL is entitled to exercise regulatory powers over Primary Dealers in terms of inter alia, Regulation 11(2) and 12 of the Registered Stocks and Securities (Primary Dealers) Regulations No. 01 of 2009, section 21D of the Registered Stocks and Securities - Ordinance, section 56A of the Ordinance and the Code of Conduct for Primary Dealers. 

“Furthermore, in response to advice sought by the Governor of the CBSL, this Department drew the attention of the CBSL to its regulatory responsibilities arising in terms of, inter alia, Regulation 11(2) and 12 of the Registered Stocks and Securities (Primary Dealers) Regulations No.01 of 2009, section 21D of the Registered Stocks and Securities Ordinance, section 56A of the Ordinance and the Code of Conduct for Primary Dealers. 

“The CBSL was also advised that necessary steps should be taken in a timely manner. In addition, the Director, Criminal Investigations Division of the Police Department has been advised to treat a written complaint made by the Governor of the CBSL in relation to the above matter as first information in terms of section 109 of the Code of Criminal Act, No. 15 of 1979 and commence investigations. The CID has also been directed to expedite such investigations and report its progress to this Department,” the Attorney General stated. (AH)