Ranil raises red flag over EPF, ETF in Parliament

• Calls for Govt. to table details of investments in listed securities from January 2010 to April 2012
• Says the two funds and Central Bank come under Finance Ministry and accountable to Parliament

In a strong move, Opposition Leader Ranil Wickremesinghe yesterday urged the Government to table in Parliament full details of all investments in listed companies of the Colombo stock market by Employees Provident Fund (EPF) and Employees Trust Fund (ETF) since January 2010 to April 2012.

This call was made when UNP Leader Wickremesinghe made a special statement under the Standing Order (23) 2 in response to growing concerns over the fate of funds of EPF and ETF via what the Opposition labelled as questionable investments.
“The monies of the EPF and ETF belong to the members. The EPF has over 13 million contributing and non contributing members while ETF has 2.3 million accounts. The Government agencies have custody of these funds and therefore plays only a fiduciary role, managing the funds in the best interest of the members including investment in Treasury Bills and shares,” Wickremesinghe told Parliament.
He said that recently the media carried news items alleging fraud and market manipulations in share transactions.
“This includes a push and dump strategy in which speculators pushed up the value of shares and then dumped them on these two funds resulting in a loss for the funds and a gain for a ring of speculators. These reports state that the loss in respect of five companies is alleged to be in the range of over Rs. 4 billion. This has caused consternation among the members and trade unions as well as employers who contributed on behalf of their employees. It has also impacted on the financial market,” UNP Leader said.
He also told Parliament that there are media reports that this issue will also be taken up by the International Labour Organization in Geneva.
Wickremesinghe also took up Tuesday’s report of the Standard and Poor’s Banking Industry Country Risk Assessment (BICRA) which stated: “Our economic risk score of ‘8’ for Sri Lanka reflects a ‘very high risk’ assessment of economic resilience and credit risk in the economy, and a ‘high risk’ assessment of economic imbalances, as our criteria define those terms.”
The report has also stated: “We see a potential conflict of interest in the Central Bank’s role. In addition to policy formulation and supervision of banks, the monetary board of the Central Bank also oversees Employees’ Provident Fund investments. The fund is a large investor in Sri Lanka banking stocks.”
“We in Parliament have a duty of oversight over these funds and safeguarding the rights of members. We have also to inquire into the findings of the Standard and Poor’s Report in regard to the EPF,” Wickremesinghe emphasised.
He said that under Article 148 of the Constitution the Cabinet of Ministers and individual Ministers are responsible to Parliament both in regard to the Government as a whole as well as subjects and functions coming under the individual ministries. Section 9 of the ETF Act states: “The Board may utilise any monies of the Fund for investment in shares for the employees with the approval of the Cabinet of Ministers”.
“However, full details of the investments made by these funds are not available to Parliament or its members. In view of the media reports by the financial agencies and the reaction of financial and trade union sectors it is imperative that the Parliament takes action to fulfil its obligations. Otherwise we may be found fault for not exercising proper oversight in regard to these funds. Inactivity on the part of this House will not be excused specially after the NSB scandal,” UNP Leader told Parliament in his statement.
“Therefore this House requires details of all the transactions of the two funds to make a considered decision regarding the truth or otherwise of these allegations and further action if any to secure the funds,” he added.
Wickremesinghe emphasised that the Government has an obligation to Parliament to make available all the information required by the House to make its own determination on this matter.
“Not only the Ministers, even the officials have a duty to keep the House informed of all the information required and give truthful answers. Article 4 (a) of the Constitution have vested this House with the powers to ensure compliance,” the UNP Leader added.
He also said EPF, ETF and the Central Bank come under the Ministry of Finance. “In these circumstances, I request this Government to inform the House of the present position of the investments made by the funds by tabling a detailed statement (format given to Parliament) of all EPF and ETF share purchases from 1 January 2010 to 30 April 2012 (inclusive) certified by the Secretary to the Ministry of Finance, who is the Chief Accounting Officer of the Ministry under which the EPF and ETF operate,” Opposition Leader Wickremesinghe told Parliament.