Most listed firms fail in compliance – SEC

Thursday, 17 March 2011 00:52 -     - {{hitsCtrl.values.hits}}

Most listed companies are non compliant with several mandatory standards, rules as well as legislations, an analysis done by the Securities and Exchange Commission (SEC) has revealed.

“We found violations and non compliances with Sri Lanka Auditing Standards (SLAS), Listing Rules and the Companies Act. It was observed that SLAS 30, SLAS 18 and section 7.6 and 7.10 of the Listing Rules were mostly violated,” the SEC said.

“We have sent 39 letters of Comment and 5 Letters of Caution, out of 106 company reviews which were concluded. Three cases are under legal scrutiny, investigation and the regulatory committee to review the necessity of any enforcement action,” the capital markets regulator said adding it has referred four matters to Sri Lanka Accounting and Auditing Standards and Monitoring Board (SLAASMB) for further technical opinions.

Its conclusion follows the completion of reviews on Annual Reports of 106 companies. SEC said it already has sent 39 letters of Comment and 5 Letters of Caution. Reviews on Annual Reports of 27 more companies are on-going.

Annual Reports with Balance Sheet dates representing 31 March 2009, 31 December 2009 and 31 March 2010 were covered under the Review as part of SEC’s Corporate Affairs Division’s Financial Reporting Surveillance Programme.

“Out of the 127 annual reports reviewed, 106 were concluded as at the report date and 98 reports had matters that prompted the Commission to write to the respective companies. According to the magnitude of the issues identified but yet unresolved, either a letter of comment or a letter of caution was sent at the time of conclusion of the reviews,” the SEC’s report said.

The Commission encourages issuers to ensure that all of their disclosures are sufficiently clear to explain matters included in their financial reports and should review their compliance with statutory requirements as a critical step in the preparation of an annual report. The Commission will continue to review the listed companies’ financial reporting as part of the Financial Reporting Surveillance Programme and instigate steps appropriate to encourage adherence to Financial Reporting requirements under SLAS, Listing Rules and Companies Act. The Daily FT will publish the full report tomorrow.

Freefall stops as Bourse gets Rs. 29 b value boost

THE  Colombo stock market yesterday put a stop to the miserable run with combined values up Rs. 29 billion thereby reducing the loss in market capitalisation to Rs. 229 billion since 14 February peak. Until yesterday the one month loss in value was Rs. 255.5 billion.

The All Share Index gained by over 1% whilst improvement in MPI was only 0.5% and turnover was lowest to date this year at Rs. 904 million and far below year to date daily average. A positive factor was a modest but welcome net foreign inflow.

“A fresh buying session pushed the indices up during early trading. Prices were stagnant thereafter amidst a dull sentiment. Low turnover and activity levels indicate both buyers and sellers are uncertain regarding the direction. Stability at current price levels will gradually improve the turnover over the next few weeks,” NDB Stockbrokers said.

Manufacturing sector was the highest contributor to the market turnover mainly due to Lanka Walltile and Ceylon Grain Elevators. The sector index increased by 1.16%. Diversified sector also contributed significantly to the market turnover due to Colombo Fort Land mainly, with the sector index gaining 0.48%.

The Lion Brewery made the highest contribution to the market turnover. The share price increased by Rs. 8.90 (4.66%) and closed at Rs. 200.

Renewed interest of retail investors was witnessed in Lanka Walltile and Colombo Fort Land. The past few days have seen certain counters switching between negative and positive contributors to the indices, which indicate the short term focus of retail investors.

“The indices recovered on thin volumes after declining for 3 consecutive days,” noted John Keells Stock Brokers.

Asia Securities said the rally of institutional investors to grasp opportunities at bargain prices spearheaded the upward momentum. However, turnover was the lowest year-to-date. It said Lion Brewery, Lanka Walltiles and Colombo Dockyard witnessed institutional activity during the day whilst Colombo Fort Land and Building witnessed high net worth and retail interest. Further, retail and high net worth participation was witnessed in Grain Elevators during the day.

Reuters reported that stock market closed firmer rising off a two-month low as investors picked up battered shares in thin turnover and volume amid forced selling worries.   

Sri Lanka’s Securities and Exchange Commission has ordered brokers to collect all debts and stop credit transactions by 30 June. They have to cut their current debtors’ positions by at least 50 percent by 31 March.

The island’s main share index  closed 1.23 percent or 86.60 points firmer at 7,115.62. It hit a record closing high of 7,811.82 on 14 February.  

Foreign investors were net buyers of 22.4 million rupees’ worth of shares on Wednesday, but they have sold a net 4.2 billion rupees’ worth in 2011, after selling a record net 26.4 billion in 2010.

The bourse is still Asia’s best performer with a 7.23 percent gain in 2011 after bringing in the region’s top return with 96 percent last year.

Turnover was 904 million Sri Lanka rupees ($8.2 million), well below last year’s average of 2.4 billion rupees and this year’s daily average of 3.4 billion rupees.  Traded share volume was 33.5 million, against a five-day average of 43.7 million. The 30-day and 90-day average trading volumes were 80.4 million and 68.5 million respectively. Last year’s daily average volume was 67.9 million.  The rupee closed firmer at 110.35/40 a dollar from Tuesday’s close of 110.50/60 on exporter dollar conversion.