SEC Investigating Taprobane Securities For Multiple Offenses On The NSB Deal

By Vimukthi Yapa

The Securities and Exchange Commission has launched an investigation into possible multiple offenses committed by Taprobane Securities in the National Savings Bank share scandal.
Highly placed sources in the SEC said Taprobane Securities is being investigated for insider dealing, front running, conflict of interest and other offenses. “It will take two to three weeks for the investigation and then the SEC commissioners will decide on the matter after the report is ready,” the sources said.
The NSB bought 7,863,362 shares of  The Finance Company at 49.74 rupees a share for a total payment of 390 million rupees well above the price share was trading in the market. Meanwhile a number of members of the NSB board have refused to vote for a board resolution to cancel the deal saying they did not approve the transaction in the first place.
However under the NSB Act the Chairman Pradeep Kariyawasam and the board secretary can make that decision and by Friday the Chairman and the Board Secretary had informed the SEC of their decision to cancel the transaction.
It was the same two people who wrote to Taprobane Securities giving approval for the purchase of The Finance shares violating the NSB Act which empowers the bank only to purchase shares in state controlled entities. The SEC on Friday reached agreement with parties involved to annul the transaction.
The shares of The Finance Company will be reverted back to their original owners through Taprobane Securities which will then pay back Sampath Bank their dues.
Thushara Jayaratne, media spokesman for the SEC confirmed to The Sunday Leader that they were investigating the deal between the two companies but could not disclose the details of the investigations. SEC summoned the CEO of Taprobane Securities, Dinal Wijemanne, along with the board of directors last week for a meeting.
Meanwhile Director of the Bank Supervision Department of the Central Bank, T. M. J. Y. P. Fernando, said that no action would be taken by the Central Bank against the NSB until the investigation by the SEC is completed. She refused further comment on the issue.
This, despite the Chairman of SEC Thilak Karunaratne informing the Governor of the Central Bank Nivad Canbral that the SEC will not be investigating the role of the Chairman and the board of the NSB in the controversy since it is the responsibility of the Central Bank to regulate the banking industry.
A former Director-General of the SEC, Aritha Wickramanyake, told The Sunday Leader that it was too premature to comment on the investigation. “This investigation needs to be carried out thoroughly, there is enough material to form a strong case but time needs to be taken over it so as not allow them to walk away free”, he said.
Wickramanyake, who is currently a senior partner at a law firm said Taprobane had not commenced any internal investigations into the incident to protect their own reputation. Asked if the SEC was correct in not suspending Taprobane’s brokering license, he responded that “the SEC cannot suspend any licences until an investigation is complete. If they were to act hastily in this matter they could be taken to court,” he said.