SEVERE ACTION AGAINST SEVERAL STOCKBROKERS

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By 2017-07-17

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By Ishara Gamage

Colombo Stock Exchange has enforced severe regulatory action against four stock brokers, sources revealed to Ceylon FT.
"S C Securities (Pvt) Ltd, Capital TRUST Securities and TKS Securities (Pvt) Limited were among those under strict regulatory alert," they said.

Sources said the CSE has launched a major market confidence-building campaign and these broker enforcement actions were also part of that process.

"We have to build our lost investor-confidence. Retailers lost their market confidence mainly due to post-war market malpractices", a senior official told Ceylon FT.

After examining several client complaints by the CSE's dispute resolution committee, the CSE four-member, non-stock broker independent arbitration and disciplinary affairs committee has instructed Capital TRUST Securities (Pvt) Ltd to pay their client damages or reinstate the lost investment portfolio.

"There were over 20 client complaints and several stock broker rule violation incidents against Capital TRUST Securities. Most complaints related to the mishandling of client accounts and giving......excessive margin credit. However, Capital TRUST has a right to appeal against the CSE's client cost recovery direction", regulatory sources said.

Capital Trust Securities (Pvt) Ltd's controlling shareholder and MD, Tushan Wickramasinghe, who is also Chairman of the Rules and Compliance Committee of the Colombo Stockbrokers Association, said the Committee's duty was to continuously monitor and evaluate the newly developed regulations and rules pertaining to the industry and take timely action taken to collaborate and support the overall objectives of the brokering industry.

While the CSE was hearing Capital TRUST Securities client complaints, its Chairman Moksevi Prelis has recently decided to step down as a CSE director on the grounds of age. He is over 80 years.
Sources also revealed that suspicions had arisen that a major fraud amounting to a staggering Rs 200 million had taken place at the SC Securities.

"Currently, KPMG has been appointed to carry out a forensic audit at SC Securities and they have also a few Capital Adequacy Requirement (CAR) based issues", sources said.
The sources also said that another stock broker, TKS Securities (Pvt) Limited, also had major CAR issues but now their operations are back to normal after a fresh capital infusion by its Malaysian owners.

The Securities and Exchange Commission of Sri Lanka (SEC) on the recommendation of the Colombo Stock Exchange (CSE) has recently directed the implementation of CAR of 1.2 times the risk requirement of stockbrokers subject to a minimum liquid capital requirement of Rs 35 million.

CAR Rules are applicable to all stockbroker firms excluding those licensed to deal only in debt securities, with effect from 1 March 2017.

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