SEC hits all round: Five investment advisors and two relatively active but low profile investors cautioned; notice of action on one advisor
Manipulate and be damned is the emphatic message the Securities and Exchange Commission (SEC) is sending out to market participants judging by the series of tough actions of late.
The capital markets regulator yesterday announced that five investment advisors and two investors (relatively active but low profile) were cautioned over manipulative trading done a year ago whilst one investment advisor has been issued with notice of action.
The suspect trading and practices had been detected during the period 1 July to 3 August and as confirmed by yesterday’s announcement the regulator had been investigating extensively before executing its decisions as per powers vested under the SEC Act.
The period under reference was one of the most volatile in the history of Colombo bourse after which the price band was introduced. In fact the three stocks trading of which were manipulative were suspended temporarily as well.
The regulatory action comes hot on the heels of SEC a fortnight ago announcing the imposition of maximum fine on ERI and two executive directors and warning two others over non-disclosure of related party transactions of substantial nature.
The SEC in a statement said yesterday that by virtue of the powers vested in it under the provisions of the Securities and Exchange Commission of Sri Lanka Act No. 36 of 1987 as amended, conducted an investigation pertaining to heightened trading activity and the unusual price escalation witnessed by the shares of Dankotuwa Porcelain PLC, Blue Diamonds Jewellery Worldwide PLC, Touchwood Investments PLC and in the warrants of Environmental Resources Investments PLC during the period 1 July – 3 August 2010.
The evidence elicited during the course of the aforesaid investigation suggested that the trades in some of the aforesaid securities which had been executed by five investment advisors amongst several (including a trainee investment advisor) representing three stock broking firms and two out of a large number of investors could possibly be construed as trades of a manipulative nature.
In the above circumstances, the Members of the Commission, at its 285th Meeting, held on 19 August 2011, having considered the matters highlighted in the investigation report decided to caution the five investment advisors and the two investors in writing. Accordingly, the said investment advisors as well as the investors were cautioned against execution of trades in future which can be perceived as manipulative.
Further, the Members of the Commission, at the meeting, having considered the findings of an investigation pertaining to suspected market/price manipulation in the shares of MTD Walkers PLC during 11 – 19 January 2010 decided to issue Notice of Action to another investment advisor intimating that proceedings will be instituted against him in terms of the provisions of the Securities and Exchange Commission of Sri Lanka Act No. 36 of 1987 as amended. Consequently, Notice of Action was issued on the aforesaid investment advisor in respect of the contravention of Rule 12 of the SEC Rules published in the Gazette Extraordinary No. 1215/2 dated 18 December 2001.