Regulator forum on listing rules sees many questions on how to de-list

(20 Jan 2014. Mon, Cey Tdy)

 

 

 

Ceylon FT: With the securities markets watchdog introducing new listing rules, a majority of the questions raised at a forum to familiarize listed companies with these rules were on how to de-list from the Colombo Stock Exchange.
The majority of the questions raised by the private sector last Friday (17) at the Regulatory Compliance Symposium, organized by the Securities and Exchange Commission (SEC) jointly with the Colombo Stock Exchange (CSE), were on how to de-list companies from the bourse with the new directives initiated by the regulator including an increase to the public float.

 

 

By Mario Andree

Ceylon FT: With the securities markets watchdog introducing new listing rules, a majority of the questions raised at a forum to familiarize listed companies with these rules were on how to de-list from the Colombo Stock Exchange.

The majority of the questions raised by the private sector last Friday (17) at the Regulatory Compliance Symposium, organized by the Securities and Exchange Commission (SEC) jointly with the Colombo Stock Exchange (CSE), were on how to de-list companies from the bourse with the new directives initiated by the regulator including an increase to the public float.

 

Despite the Securities and Exchange Commission Chairman 

Dr. Nalaka Godahewa claiming that the new SEC directives were not ad-hock, but were finalized after consultation with relevant stake holders, many sorted out the methodology to de-list.

 

The new directives are in the process of being implemented to the Listing rules of Colombo Stock Exchange.
The SEC last month introduced three main directives to manage related party transactions, disclosures and improve the minimum public float. The panel discussion followed by three illustrative presentations focused mainly on the minimum public float with more than 80% of questions posed to the head table focused on the directive.

 

SEC Director Legal and Enforcement, Ayanthi Abeywickrama told participants at the symposium that the de-listing procedure, which was available but not practiced was not only costly, but could harm the good name the already listed company.

She said, “It is a costly procedure to De-List than complying with the new directives initiated by the SEC.”
Accordingly, 60% of the listed companies on the Main Board of Colombo Bourse were compliant to the new directives while the rest had to improve.

A senior official said that there were only a few companies far from achieving, while most in the non-compliance group were close to achieving the minimum public float.

 

The non-compliant companies, according to Abeywickrama were given three years till December 2016; to comply by increasing their minimum public float by any lawful method which the company would choose as willing.The Minimum Public Float Directive: for Main Board companies, a minimum public holding to 20% in the hands of 750 public shareholders or a market capitalization of Rs 5 billion of its public holding in the hands of 500 public shareholders whilst maintaining a minimum public holding of 10%. For Diri Savi Board companies a minimum public holding of 10% in the hands of 200 public shareholders.

 

As reported in the pages earlier this month, good governance and minority shareholder rights activists said the new rules were inadequate.

K.C. Vignarajah, Dilesh Jayanntha and Tissa Seneviratne in a strongly worded letter to the SEC said the ‘hurried’ release of new rules and directives on related party transactions and public float were very limited and inadequate and the loopholes provided ‘manna from heaven’ to crooked players in the stock exchange.

 

“Appeasing and mollycoddling the white collar criminals, to whom notice has already been given about 3 years ago, after years of agitation by IMS (independent minority shareholders) is totally unacceptable. After permitting this extended period of impunity, a further legalizing aspects of white collar crimes may be the ultimate result.  The mafia toasted the new rules.

 

“The principles of natural justice, good corporate governance, unjust enrichment, fraud, misappropriation, criminal breach of trust, manipulation, and concealment of the property of the shareholders, oppression and mis-management have to be punished if Sri Lanka is to become the desired investment hub or the cherished goal of becoming the Wonder of Asia.

 

“Manna from heaven: the worst scenario is the huge bonanza that could be given in the guise of punishment (suspension from trading or even winning ‘mandatory delisting’ which is the cherished goal of ruthless corporate crooks and fraudsters intent on impoverishing and debilitating the innocent helpless IMS,  and the investing public). If the confidence of investors is to ever return, delisting has to be banned, particularly until this transitional period is satisfactorily completed. 

 

The criminal unjust enrichment of CI & RP (Controlling Interest and Related Parties) has to stop. A powerful wide ranging investigation into patterns of trade over the last 10 years has to be diligently undertaken. The wrong-doers must be punished. 

 

They must compensate the victims out of their personal property and funds without burdening the company. Terminate such management which attempted to defraud the small investors/shareholders (small partners) unlawfully misusing the powers entrusted to them by the shareholders,” they said in the letter to the SEC.