Uncertainty over new SEC Bill slated for P’ment today

• Concerns over criteria to select Chairman of the capital market’s regulatory body, enlarging scope to regulate unlisted securities

The new Securities and Exchanges Commission (SEC) Bill slated to come up in Parliament today has caused some uncertainty from both ruling and Opposition benches over its credibility and effectiveness.

Decried by ex-regulators and analysts, the SEC Bill towards a new and powerful Act has been long standing. 

Several provisions in the Bill are claimed to be contentious. One is the criteria for the appointment of SEC Chairman. The existing Act stipulates that an appointed member from the private sector should be appointed as Chairman though the incumbent is seconded from the Attorney General’s Department.

The new Bill proposes that six persons possessing professional expertise and standing in respect of matters relating to the securities market and possessing special knowledge or wide experience and proven competency in fields of law, finance, accounting and economic, banking or business, be appointed by the Minister as appointed members, in order to reflect the multidisciplinary character of the Commission of whom at least five persons shall be from the private sector. 

Analysts claimed that this provision would secure a place for the incumbent Chairperson and by default admit that his appointment was bad in law as of now. 

The other thorny provision is that the new Bill enlarges the scope of the SEC to regulate unlisted securities, which is a herculean task. At present there are only 285 listed companies, whereas those outside number in the thousands. Even at present good governance by some of those listed is questioned and the SEC draws flak over the failure to effectively regulate those listed. 

The new Bill also encompasses SEC oversight to cover a possible exchange and those listed in it in the mega Port City. This too they opined would be very challenging and that the SEC was asking for more teeth for something it could not chew. 

In SEC’s 2020 Annual Report, Chairman Viraj Dayaratne PC said: “The proposed law has many salutary provisions that will enhance efficiency in regulation as well as enable the development of the market. The long delay, we believe may be to our advantage as we will now be able to leapfrog into modernity having learnt from the challenges faced by countries that had taken incremental steps over the years.”

Last month the Daily FT exclusively reported that top corporate lawyer and former regulator Arittha R. Wikramanayake had raised serious concerns over the new SEC Bill exposing several draconian provisions.

“There is too much power in the hands of the regulator, and if in the wrong hands it will kill the market,” Wikramanayake opined. 

 “Giving discretion to this level to a single individual is a very dangerous thing,” he said, adding in a lighter vein: “When I read this bill, I was thinking to myself if I had the choice of being God or the Chairman of SEC, I would be the Chairman of the SEC because the Act gives so much power.”

He also argued that the Bill would place a burden that the market, in his opinion, was not ready to bear yet. 

“The Bill might kill the market eventually and drive out market participants, intermediaries and discourage listings,” Wikramanayake told the seminar on the new SEC Bill organised by Asian Pathfinder and Corporate Legal Consultants in association with the Daily FT. 

“I also will never get on to a board of a listed company under this proposed Act,” Wikramanayake confessed in his talk at the seminar, which also featured SEC Chairman Dayaratne, former Chairman and DG Dr. Dayanath Jayasuriya PC and former Director Legal and current LOLC General Insurance CEO Kithsiri Gunawardena. It was moderated by former SEC DG and Senior Advisor Ministry of Finance Malik Cader.