Following is the text of the letter written by good governance and minority shareholder activist K.V. Vignarajah to President Mahinda Rajapaksa dispatched via President’s Additional Secretary and Chief of Staff Gamini Senarath following the meeting between the President and capital market stakeholders last week
20th July 2012
HE Mahinda Rajapaksa,
The President of the Republic of Sri Lanka,
We thank you for inviting us to obtain our views on the current state of the stock market; the causes and possible remedies to reactivate the market.
The propaganda built up by certain sections of the media, influenced largely by the wrongdoers, (insider traders, market manipulators, frontrunners, ‘pump and dump’ artistes) who have been checkmated by the strong SEC.
It appears to be orchestrated to replicate the last year’s very sad saga of the crooked operators boasting that they were able to move out honest outspoken Indrani Sugathadasa and her able DG Malik Cader. Investor confidence was shattered and market continued to decline. The intimidatory caption ‘Malik or the Market’ was proved wrong!
Dr. Thilak Karunaratne was appointed as the Chairman of SEC and Prof. Dr. Harendra Dissa Bandara was appointed acting DG. Within a very short period of time, they have established tremendous reputation of honesty, efficiency and sturdy independence. The mafia seems to have surges of maniacal anger whenever good, honest and truly patriotic persons go about doing their duties and protecting the innocent decent citizens of the country from being grossly exploited. The decent investor’s confidence is gradually coming back.
However, I wholeheartedly agree with Desamanya Chari P. de Silva’s article titled ‘Dividends Or Capital Appreciation Or Both?’ appearing in The Business Times (Sunday Times), Sunday Island and The Sunday Leader on 15 July.
Quote: “I cannot see a recovery of its old lustre unless the SEC prosecutes some big players and puts them behind bars. In the present climate of brazen criminality I cannot see this happening. It will need a new breed of very strong and upright people to reverse the present trend.”
Your Excellency, the correct people are now there to implement the regulations. Your support and encouragement to them, to do their duties will certainly be a good move towards achieving one facet of your cherished goal of Sri Lanka being the ‘Wonder of Asia’.
Your Excellency, we have heard of your passion to defend the rights, ensure the wellbeing and the upliftment of the average citizen. Their meagre savings and wealth can be devastated by the wrongdoers, in the absence of strong regulatory framework and proper guidance. Otherwise, it would be like leading thousands of lambs to the wolves. Briefly, the well known causes of the downfall of the market are:
- Rampant insider trading, market manipulation, front running, ‘pump and dump’ antics of the wrongdoers.
- Bad corporate governance. Absence of truly independent directors and auditors.
- Controlling Interests (CIs) manipulating financial statements/annual reports to create depressing “shareholder fatigue”. Suppression of material information including proper valuation of assets etc.\
- CIs of public listed companies siphoning off profits and spinning off valuable assets to subsidiary/associate/private companies where the CIs stakes are higher or total.
- Deliberate suppression of reasonable cash dividends, depriving real shareholder returns and revenue to the State by way of withholding tax. In the 2006 Budget speech, Your Excellency extolled the virtues of an investment oriented public being encouraged by the payment of at least 50% of NPAT. Many loopholes were created and your wonderful vision was nullified. Your vision must be revived, and implemented with full force .It will create tremendous impetus and be a win-win situation for the stock market, investors and Treasury.
- The strange movements and volatility of the exchange rate and the interest rate have also caused havoc in the stock market. Many windfalls profits have been made whereas millions have suffered misery. The artificially propped up rupee caused the uncompetitiveness of Sri Lankan goods and services, ballooning the Trade Deficit which can only be addressed by a competitive rupee.
The appalling, brazen NSB-TFC deal was a grievous insult to the integrity of our stock market and our country. I was the first to applaud and defend your action. Some so-called analysts and experts stated that it was wrong action on your part to interfere with market trades! I had countered that these insider deals were illegal and void ab initio! Thus no rights can flow from such illegal contracts.
Your Excellency’s ambition to fly the flag of our country high is being undermined by many extremely selfish persons. You have great potential to do good by defending the actions of the regulators to do their duty of protecting the investors, create level playing field and ensure fair play.
Thanking you for your attention.