SEC finalises new Act

• Final draft of new legislation, pending for years, sent to Finance Ministry for tabling at Cabinet meeting
• SEC Chief says new version brings greater clarity, removes ambiguity
• Ensures robust regulation regime whilst proactively facilitating capital market development 
• Stepping up key functions such as supervision, surveillance, investigations with new IT systems, skilled and competent human resources, donor funding
• New Act is among fresh measures to revitalise capital market, broaden both local and foreign investor base, increase listings, and improve efficiency via digitalisation 

By Nisthar Cassim

The Securities and Exchange Commission (SEC) has finalised its new Act for submission to Finance Minister PM Mahinda Rajapaksa, to be tabled before the Cabinet for approval.

The new SEC Act has been in the works for several years, with multiple drafts and 

many rounds of stakeholder consultation. 

“We have refined the final draft, bringing greater clarity and removing ambiguity. Overall, it is a progressive new piece of legislation aimed at ensuring robust regulation, as well as facilitating the development of the capital market,” SEC Chairman Viraj Dayaratne, PC told the Daily FT yesterday. 

The original SEC Act No 36 of 1987 has seen three amendments previously, in 1991, 2003, and 2009.

Capital market stakeholders for several years have been calling for a new Act to ensure that regulation and market development keeps pace with modern era dynamics.

Dayaratne said that the SEC yesterday sent the finalised draft Act, along with the relevant memo, for the Finance Ministry’s consideration and for presentation to the Cabinet. 

The SEC is confident of an early passage for the new Act, which is among a host of fresh measures to revitalise the capital market, broaden both the local and foreign investor base, increase listings, and improve efficiency via digitalisation.  

Among key developments dependent on the new Act is the long-awaited demutualisation of the Colombo Stock Exchange (CSE). 

Dayaratne said the focus of the newly-constituted Commission members is to ensure healthy regulation both for investor protection, risk mitigation, and market development. “The new Commission understands the requirement is a fine balance of robust regulation and broad-basing the capital market, to realise its true and fuller socio-economic potential,” the Chairman emphasised.

“The new Act will help carry out the SEC’s mandate properly, and be flexible when needed, given the evolving status of an emerging capital market in Sri Lanka,” he added.

“Regulation shouldn’t stand in the way in the proper functioning of a fair and orderly market, as well as its further development,” Dayaratne pointed out. 

“The capital market doesn’t have to fear the regulator if they are playing by the rules, as well as enhancing self-regulation. We are progressive and the misconception or perception of over-regulation is unwarranted,” the SEC Chairman explained. 

As part of ensuring robust yet facilitative regulation, SEC is stepping up key functions such as supervision, surveillance, and investigations, with new IT systems, skilled and competent human resources, and donor funding. 

The new Act comes at a time when the Colombo stock market has shown resilience to not only bounce back to pre-COVID closure, but has also progressed further.

The CSE said this week the ASPI has risen by 18.97% since reopening of the market on 11 May, whilst S&P SL20 index is higher by 21%.

Market capitalisation has increased by Rs. 235.5 billion, whilst YTD daily average turnover at Rs. 1.35 billion is the highest since 2014. CSE said the average number of daily trades is up 73% from 2019, 133% from 2018 and during May-August, nearly 6,000 new accounts had been opened, up 98% from 2019 and 56% from 2018. Of the new accounts, 47% are by those in the 18-30 age group. Furthermore, local investors now account for 75% of turnover, as against 36% during pre-closure.