By Uditha Jayasinghe
In the wake of the controversial National Savings Bank (NSB) deal, the United National Party (UNP) yesterday renewed calls for a thorough investigation into that transaction as well as previous allegations of insider trading in the Bourse but stopped short of wanting it cancelled.
UNP MP Dr. Harsha de Silva insisted to media that the Rs. 390 million deal between NSB and The Finance Company (TFC) had unveiled the “tip of the iceberg” on insider trading within the Colombo Stock Exchange (CSE) and called for the removal of NSB Chairman Pradeep Kariyawasam.
Describing the offenders as part of the “stock market mafia,” Dr. de Silva vehemently called on the Government to conduct an investigation and reveal the offenders behind the transaction. Quoting from the Banking Act of 1988 Dr. de Silva pointed out that it clearly stated any director acting against the interests of the bank should be removed.
“To date the losses from this transaction exceed Rs.1.5 billion,” he alleged, displaying on a diagram how NSB bought shares that were 65% above the market price. “On the date the deal took place, the share price of TFC was only around Rs. 30, but there were many that sold shares for Rs. 50 or slightly less. This is an amount that is literally off the charts.”
A few days later the price returned to Rs. 30 and was trading at Rs. 29.50 on Tuesday pulling down the overall market as well. Dr. de Silva remarked that an investigation was all the more necessary as NSB’s annual report detailed an intricate approval process that was supposed to weed out suspicious deals.
“This is disgraceful for a company that dedicated pages of its Annual Report to explain the investment decision making process. According to page 89, the Investment Committee looks at the deal and then passes it on to a Management Committee. From there it moves to the Chairman and then to the Board of Directors. There is even a separate committee to implement the decision. So how did this happen?”
Given the murkiness of the deal, Dr. de Silva demanded to know why the Board of Directors, the Chairman and other committee members did nothing to stop the transaction. He questioned whether there was outside influence to move ahead with the deal and even asked conscience-driven officials to step forward and help with the investigations. Despite many people being involved in the deal, he noted that the Chairman had to take full responsibility as the head of the organisation.
“Given the seriousness of the issue, why have the NSB officials remained quiet? Why are there no explanations from them? The NSB is the only bank in Sri Lanka with its savings guaranteed by the State, which means that any monetary fallout from the deal has to be covered by the Government. This could lead to extra taxes for the people. Moreover, NSB has around 16.7 million accounts, showing that a large part of the population’s savings are concerned in this matter. All reasons for the Government and the Securities and Exchange Commission (SEC) to take tough action.”
As the SEC is already conducting an investigation into the matter, the MP encouraged it to be as wide-ranging as possible and emphasised that it should look into previous allegations of insider trading. “I have been raising this issue in Parliament for the last two and a half years, but every time the Government has postponed reply.”
However, he did add a note of caution. “This investigation should be done carefully so as not to harm the CSE’s trustworthiness. This is also why we believe that the transaction should not be cancelled as it would reduce faith in CSE dealings. Nonetheless a transparent probe would bolster the Bourse as it would prove respect for law and order.”