Sri Lanka Equity Forum
Dear Reader,

Registration with the Sri Lanka Equity Forum would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
Sri Lanka Equity Forum
සිංහල පරිවර්තනය
Poll

SLEF Market Sentiment Indicator

73% 73% [ 1136 ]
27% 27% [ 424 ]

Total Votes : 1560

Latest topics
» Yahapalanaya Hits on financials-Listed companies
by Teller Today at 2:05 pm

» Is AINV.N going to its END
by Teller Today at 1:44 pm

» Bil will hit Rs.5/= within next 6 Month
by sanjulanka Today at 12:53 pm

» IS PABC ENTRAPPED IN TREASURY BONDS TRADES???
by samaritan Today at 12:47 pm

» Do you think FLCH XD Date price will 3.60
by sharemarket Today at 12:45 pm

» Reasons for negative comments by members on CSE
by samaritan Today at 12:12 pm

» Ahoo Kalamazzoooo....
by Namal Today at 11:11 am

» CTBL soon be a Gem
by ruwan326 Today at 11:01 am

» LOLC will hit again
by sharemarket Today at 10:22 am

» Justice vs Injustice
by reyaz Today at 9:51 am

» KZOO.N0000 Will Rise Up
by Elahara Yesterday at 6:23 pm

» COLOMBO SHIT EXCHANGE UNDER YAHAPALANAYA
by Ran49 Yesterday at 5:26 pm

» How CSE reacted after Ranil rang the trading commencement bell to mark 30th anniversary
by Ran49 Yesterday at 4:52 pm

» Sri Lanka, the First Asian country to become the Victim of China’s Debt Trap.
by DS Wijesinghe Yesterday at 4:27 pm

» LDEV gonna be a Gem soon
by Chinwi Sat Aug 19, 2017 2:33 pm

» Windows installer doesn't allow me to set up the desktop app of Acuity online trading system.
by Jayashantha Sat Aug 19, 2017 8:30 am

» Anyone ready for the super September ?
by Ran49 Sat Aug 19, 2017 7:16 am

» Browns capital quite stable
by reyaz Sat Aug 19, 2017 2:29 am

» You still do not believe in the earnings on the Internet?
by ruwan326 Fri Aug 18, 2017 7:39 pm

» New Tax Reform Bill to impose a stock trading tax? - Reuters
by Ran49 Fri Aug 18, 2017 7:25 pm

» Vehicle Prices
by worthiness Fri Aug 18, 2017 3:05 pm

» RWSL Dividend Rs. 0.15 per share / Final Dividend
by MasterD Fri Aug 18, 2017 2:32 pm

» Life Insurance Companies to be affected by new Tax Bill?
by DS Wijesinghe Fri Aug 18, 2017 1:42 pm

» SIRA loss increased by 270℅
by gdid Fri Aug 18, 2017 1:34 pm

» How to send privet Massages here
by Teller Fri Aug 18, 2017 1:07 pm

» where is AINV financials
by Teller Fri Aug 18, 2017 11:56 am

» Apla huge profit drop,-76%
by Teller Fri Aug 18, 2017 11:52 am

» LOFC Chart 28.04.2017 (weekly chart)
by stockback Fri Aug 18, 2017 10:32 am

» BIL will give you quick 10% return
by sharemarket Fri Aug 18, 2017 9:49 am

» Motor bike tax reduction by 90℅
by Harry82 Fri Aug 18, 2017 9:19 am

» Market is falling continuously
by soileconomy Fri Aug 18, 2017 7:43 am

» Harry J-led Japanese consortium makes UL offer in writing
by DS Wijesinghe Thu Aug 17, 2017 7:22 pm

» Banking sector financial soundness indicators stable: IMF
by DS Wijesinghe Thu Aug 17, 2017 7:12 pm

» DUTY OF CSE & SEC
by niru Thu Aug 17, 2017 3:07 pm

» JKH will settle @ 160
by Teller Thu Aug 17, 2017 1:52 pm

» Abans in mega Shopping Mall project : Fitch report
by Wimal Modawansa Thu Aug 17, 2017 12:03 pm

» Nest profit down by 33.4℅ YOY
by Teller Thu Aug 17, 2017 11:48 am

» I Quit CSE today and Enter NASDAQ/TDWL
by D.G.Dayaratne Thu Aug 17, 2017 11:24 am

» RENUKA CAPITAL PLC (KZOO)
by Namal Thu Aug 17, 2017 8:13 am

» PABC Bank..
by Chinth Wed Aug 16, 2017 9:56 pm

» CSEC and CFVF
by ruwan326 Wed Aug 16, 2017 7:07 pm

» ABOUT BFL.....
by Deen79 Wed Aug 16, 2017 3:15 pm

» CHOT 62% loss QOQ
by Teller Wed Aug 16, 2017 2:10 pm

» Sri Lanka: Stock Market - Blood Bath on First Day of Ranil's fourth Term lead UNP Government - over 500,000 Investors are awaiting Rs.500,000 per investor Margin Trading promise given in UNP Manifesto amounting to over Rs.250 Billion
by DS Wijesinghe Wed Aug 16, 2017 1:52 pm

» BINARY OPTION TRADING
by samaritan Wed Aug 16, 2017 1:49 pm

» FLCH-First to decalre Div?
by Agape Wed Aug 16, 2017 10:54 am

» sell and exit from CSE
by nigma Wed Aug 16, 2017 8:35 am

» Today ASPI 45 points down???? JKH 160/50
by nigma Wed Aug 16, 2017 8:21 am

» YORK RS. 1.00 DIVIDEND........?
by wisdom79 Wed Aug 16, 2017 7:24 am

» COCR IN TROUBLE?
by Chinwi Wed Aug 16, 2017 7:22 am

» Teller .Equity stars 12123....
by Teller Tue Aug 15, 2017 11:14 pm

» PABC TO BE FINED !
by Teller Tue Aug 15, 2017 11:09 pm

» plantation shares.....
by Captain Tue Aug 15, 2017 11:01 pm

» FLCH Browns Capital
by hanuma Tue Aug 15, 2017 10:31 pm

» COCR profit declined QoQ by 19℅
by Teller Tue Aug 15, 2017 6:13 pm

» Advertise on Sri Lankas' No.1 Stock Market Forum!!
by Teller Tue Aug 15, 2017 6:11 pm

» ABANS FINANCE UNDER INVESTIGATION BY CSE AND SEC?
by Wimal Modawansa Tue Aug 15, 2017 5:24 pm

» KHL 380℅ lost QOQ
by samaritan Tue Aug 15, 2017 5:12 pm

» Open an Account with https://expertoption.com/?refid=10784
by jayasurya1126 Tue Aug 15, 2017 3:46 pm

» COUNTRY HEADED TOWARDS A BOP CRISIS !
by skyfall Tue Aug 15, 2017 11:11 am

» Hemas Profitability drops, CEO Steven Enderby warns tough times ahead but confident of HHL future growth
by reyaz Tue Aug 15, 2017 10:10 am

» PROPERTY BUBBLE IS IMMINENT !
by reyaz Tue Aug 15, 2017 10:05 am

» ELPITIY Good Profit
by visvajith Tue Aug 15, 2017 9:37 am

» භාණ්ඩාගාර බිල්පත් පොළිය තවදුරටත් පහළට
by stockback Mon Aug 14, 2017 10:44 pm

» Plantation Shares...
by Captain Mon Aug 14, 2017 10:12 pm

» watch CTBL & ASIYA
by Teller Mon Aug 14, 2017 9:59 pm

» Will JKH touch Rs. 180
by Miss-Sangeetha Mon Aug 14, 2017 10:28 am

» NOW TALK ABOUT YORK ARKADE PLC
by reyaz Mon Aug 14, 2017 9:59 am

» Ceylon Foreign Trade
by Investor1994 Mon Aug 14, 2017 7:47 am

» Sri Lanka Trade Deficit to widen with more urgent rice imports
by DS Wijesinghe Mon Aug 14, 2017 6:55 am

» More than 100 Annual and interim financial statements will be publish withing next 3 working days...
by Teller Mon Aug 14, 2017 12:54 am

» LIOC is active again
by Teller Mon Aug 14, 2017 12:52 am

» Sri Lanka Govt ready to squeeze credit to property'
by anges Sun Aug 13, 2017 10:12 pm

» DirectFN used by anyone now (Aug 2017)
by prabath Sun Aug 13, 2017 9:46 pm

» COUNTRY HEADING TOWARDS CHAOS....!!!!
by Teller Sun Aug 13, 2017 7:21 pm

» Whats up with ctld?
by Teller Sun Aug 13, 2017 6:51 pm

» Anna Umbalage ekek Yahapalanayata avilla
by Teller Sun Aug 13, 2017 6:18 pm

» ASI now 6500
by Teller Sat Aug 12, 2017 11:40 pm

» AINV.N Starts again ?
by Teller Sat Aug 12, 2017 11:32 pm

» Mattala Airport to be leased to Indian company ----GREAT.... Srilankan Airline is the only problem ...no one is willing to take
by Teller Sat Aug 12, 2017 11:29 pm

» Equity Forum
by Teller Sat Aug 12, 2017 11:17 pm

» If same thing happens in MR era?
by bakapandithaya Fri Aug 11, 2017 3:11 pm

» BOND GATE ........!!!!!!!!
by samaritan Fri Aug 11, 2017 10:38 am

» CENTRAL BANK BOND EXPLOSION ROCKS CSE
by samaritan Fri Aug 11, 2017 10:01 am

» Ravi to resign .....
by Chinwi Fri Aug 11, 2017 9:50 am

» MADU .......
by bakapandithaya Fri Aug 11, 2017 1:09 am

» What will Basil do now?
by bakapandithaya Thu Aug 10, 2017 11:46 pm

» MARKET DOWNSWING
by Ran49 Thu Aug 10, 2017 11:17 pm

» RAL with Max Profit.....
by Teller Thu Aug 10, 2017 11:07 pm

» ECL ECL Surpass 8++ with in next Week
by Teller Thu Aug 10, 2017 11:02 pm

» MALWATTE PLANTATIONS
by Ran49 Thu Aug 10, 2017 10:53 am

» All share RSI 20
by sharemarket Thu Aug 10, 2017 10:30 am

» TOP LISTED FINANCE COMPANIES
by Wimal Modawansa Thu Aug 10, 2017 10:08 am

» 20th AMENDMENT TO THE CONSTITUTION - FOR WHAT?
by Yahapalanaya Thu Aug 10, 2017 8:57 am

» How to invest in foreign stock market?
by Neluka Karannagoda Thu Aug 10, 2017 8:20 am

» LLUB any news?
by thankrishan Wed Aug 09, 2017 12:33 pm

» To beat the heat Chevron seeks better strategies
by DS Wijesinghe Wed Aug 09, 2017 6:51 am

» WHY THIS IS IMPORTANT TO READ NOW
by worthiness Tue Aug 08, 2017 7:54 pm

» GREG,DPL,TAP..........NOW LOLL
by wisdom79 Tue Aug 08, 2017 7:06 pm

Old Boy Network of Insider Dealing - How Michael Mack and Otara, Ruchi, Ajit and their father Norman Gunawardene manipulated shares in UNP Era - Sunday Leader

View previous topic View next topic Go down

Old Boy Network of Insider Dealing - How Michael Mack and Otara, Ruchi, Ajit and their father Norman Gunawardene manipulated shares in UNP Era - Sunday Leader

Post by Business Basil on Mon Jan 05, 2015 3:31 am

The old boy network and insider dealing

By Asgar Hussein

The crisis at the Securities and Exchange Commission (SEC) arising from the insider dealing drama is shaking its very foundations. Its image as an independent and credible market watchdog has been greatly tarnished.

The implications of this issue are so serious that it may be necessary for the government to reconstitute the commission by appointing new members.

And the government's very commitment to transparency and good governance is under test. The question is whether it will, in the name of the old boy network, turn a Nelsonian eye to the findings of the SEC investigation and observe the law only in the breach.

This case has also highlighted the dangers of appointing shareholders and board members of companies to regulatory bodies, thereby leading to conflict of interest situations. The government may now be compelled to reassess this policy.

In fact, the Director General, SEC, Dr. Dayanath Jayasuriya himself has charged that "the course of action decided by some members of the commission was most bizarre and unprecedented in the 15 year history of the SEC."

Some of the members not only have a serious conflict of interest in the case, but also stand accused of violating the SEC Act. However, their attempts to hush up an investigation into the alleged insider dealing of the previous Chairman, Michael Mack and other leading businessmen have now boomeranged.

Indeed, if the allegations levelled by the SEC Director General are true, the entire commission will have to resign. Given the seriousness of the allegations made by Jayasuriya, the Finance Ministry will do well to probe whether the SEC indeed had tried to subvert the investigation, lest it be accused of attempting to protect leading businessmen accused of attempts of subverting justice.

Dr. Jayasuriya, who has accused the commissioners of gagging him, will this week meet Finance Minister K.N. Choksy to brief him about the rotten state of affairs at the SEC. He has already indicated that he cannot continue to be associated with the commission, citing the conduct of some of the members and their modus operandi.

He has stated that some of the members have a very serious conflict of interest with regard to the insider dealing case. He asserted that "four of the appointed members cannot, by any stretch of imagination deal with this matter." In fact, their very participation in the deliberations of the commission in this case violates Section 9 of the SEC Act.

False statements

Dr. Jayasuriya's exclusion from dealing with a privately selected team of experts (who probed the allegations of insider dealing and submitted an independent report) was also in violation of the act.

He has alleged that the report of the expert panel contains several false statements and incorrect assumptions. Controversy surrounded the move by the commission in November to bypass the Attorney General's decision to prosecute the accused by seeking an independent opinion. The AG had stated that there was a prima facie case against the accused in the insider dealing case that revolved around controversial share transactions involving the Aitken Spence conglomerate.

However, the AG having considered the independent report submitted by Former Supreme Court Judge S.B. Goonewardene and Lal Nanayakkara has now reaffirmed the need to prosecute the accused. On January 24, Attorney General K.C. Kamalasabayson informed Acting Chairman, SEC, Nihal Jinasena that there was sufficient evidence to institute legal proceedings against Michael Mack and Norman Gunawardene.

Mack, a former chairman of the Aitken Spence conglomerate, was chairman of the SEC until the issue compelled him to take leave of absence in November. Gunawardene was a director of the Aitken Spence Group.

The AG further stated that Manil de Mel, another former director of the group, may be given an opportunity to show cause before proceedings are instituted against him.

Kamalasabayson also took the commission to task for seeking a second opinion. "I am constrained to observe that the commission has acted improperly in deciding to obtain the said opinion despite the earlier ruling by the department, particularly where the issue involves the chairman of the commission," he said.

The AG's opinion has given the SEC secretariat the greenlight to prosecute Mack and Gunewardene. Their investigations have also revealed that it was the Chairman of the Colombo Stock Exchange, Ajit Gunewardene who had given the sell order for all the Gunewardene family's shares. This further implicates Ajit Gunewardene (the son of Norman Gunewardene), who is also a senior director of the John Keells conglomerate.

When contacted by The Sunday Leader on the latest allegations against him, he took an evasive stand. "Because all this is in limbo, I don't want to say yes or no," was his response.

The SEC investigators will now also probe the transactions by the Gunawardenes' private family company (Nordel Investments) and the Macks' private family company. (Luckannon)

Angry reactions

Some of the commission members reacted very angrily to the move to prosecute Michael Mack and Norman Gunewardene. Singer Chairman, Hemaka Amarasuriya has already announced his resignation from the commission, citing his disagreement with the findings of the investigators.

He had said it was tragic that the investigators probing the case had misrepresented financial statements. He also ridiculed them by saying they did not even know how to read a balance sheet properly.

These comments have however exposed Amarasuriya to criticism. Some said he had failed to grasp the basic concepts relating to the offence of insider dealing. They said that what has to be taken into account was whether the accused were privy to price sensitive information at the time of the disposal of shares.

Member, SEC Commission, Cubby Wijetunga also criticised the decision to prosecute Mack and Gunewardene, who he claimed are innocent of the charges against them.

He referred to the AG's ruling as "most distressing." When contacted by The Sunday Leader, Nihal Jinasena described the allegations of conflict of interest as "absolute rubbish."

According to the SEC Act, an insider is not permitted to trade in shares of a company to which he is connected if he knows he has access to unpublished price sensitive information. Any person found guilty of the offence shall be liable on conviction after summary trial by a magistrate, to a sentence of imprisonment of either description for a period not exceeding five years or to a fine not exceeding Rs. 10 million or to both such imprisonment and fine.

Insider dealing

The insider dealing case in question revolves around controversial share transactions involving the Aitken Spence conglomerate. A former chairman of the group, Michael Mack, and two directors Norman Gunewardene and Manil de Mel have been accused of insider dealing.

Their family members are also being investigated over the transactions. They include Gunewardene's children Ajit, Ruchi and Otara of Odel fame as well as Mack's wife and two daughters.

It was on May 22, last year, that the sorry state of affairs at Aitken Spence was highlighted by its Accountant/Secretary, Ranjan Casie-Chetty. He had informed the board about the heavy losses of their troubled subsidiary-Aitken Spence Garments Pvt. Ltd. He also referred to massive fraud and exchange control violations.

Shortly after, three members of the Aitken Spence board, their family members and family owned companies disposed of large parcels of their shares.

Disposing of shares

On May 30, Gunawardene's children Ajit, Ruchi and Otara sold 60,000 shares. The following day the elder Gunewardene and a private family company, Nordel Investments Pvt. Ltd. disposed of 600,000 shares. Then on June 10, he disposed of another 105,400 shares.

On that same day, Michael Mack, his wife, their two daughters and a private family company called Luckannon sold 1,002,002 shares.

What matters now is that further investigations into the transactions be conducted in a fair manner - the accused will have to be prosecuted in accordance with the law.

The whole issue is an indictment on the manner in which our corporate affairs are conducted. The government may perhaps have to reconstitute the commission and reassess its policy of appointments to top posts in regulatory bodies to ensure that conflict of interest situations do not arise.

It is imperative that public faith and confidence in our institutions and the market be maintained.

Jayasuriya's letter to the Finance Ministry

December 26, 2002
Mr. C. Ratwatte,
Secretary to the Ministry of Finance
and Secretary to the Treasury,
Colombo.

Dear Sir,

I am writing to you to bring to your notice a serious situation that has arisen regarding the functioning of the SEC and its credibility. Section 42(2) of the SEC Act No. 36 of 1987, as amended, states as follows:

"The director general shall, subject to the general direction and control of the commission, be charged with the direction of the affairs and transactions of the commission, the exercise, discharge and performance of its powers, functions and duties, and the administration and control of the employees."

At a special meeting of the commission convened in early November to discuss the letter of the Attorney General's Department dated November 1, 2002, regarding the institution of criminal proceedings against the chairman of the SEC and two others and to cause further investigations into certain other trades in the shares of Aitken Spence and Co. Ltd., the person who acted for the chairman at the meeting, in terms of Section 7(2) of the Act, was entrusted with the task of consulting two independent experts on the issue of "price sensitivity."

I was informed that "my lips are sealed" and that I cannot communicate to anyone (even to the director, investigations, who had thus far handled this matter), the particular course of action adopted by the members. References were made at the meeting to the gross injustice that had occasioned to the eminent personalities refered to in the letter of the A.G. as a result of the SEC secretariat having conducted an investigation into alleged insider dealing transactions in the trades of Aitken Spence.

I maintained that the secretariat was duty bound to conduct preliminary investigations irrespective of the eminence of the personalities involved and that the secretariat was strictly guided by instructions it had received from the AG's Department as to whether there was a prima facie case to be investigated and if so how it should proceed.

As the course of action decided by some members of the commission was most bizarre and unprecedented in the 15 year history of the SEC and since aspersions were cast on the integrity and credibility of the secretariat, I tendered my resignation with immediate effect. I was then persuaded by almost all those present that I should not do so at this stage as there would be unnecessary speculation in the press. With due deference to their wishes I did not pursue the matter. The understanding at that time was that within one week or so that matter would be finalised.

The secretariat was requested by Dr. Jinasena (incidentally, whose letter of appointment as acting chairman has yet to be received by the secretariat) to give him 25 letterheads of the SEC. Upto date, the secretariat has no copies of any letters sent by him. This, you will appreciate, is a serious breach of standard practice within a regulatory body, whose records are open to inspection by courts of law.

The report of the two member panel was considered at a special meeting held on December 6. I was told again that "my lips are sealed" and that other members too will also keep the contents of the report confidential. All press inquiries were being handled by Dr. Jinasena.

Much to my surprise, I find the contents of the report have been leaked to at least one newspaper and the business editor of that newspaper (The Daily Mirror) has made serious allegations that the secretariat had suppressed vital documents from the Attorney General and misrepresented facts. As my lips are "sealed," I am unable to issue a press statement to meet these allegations and vindicate my reputation as well as that of the secretariat.

Dr. Jinasena has also not been forthcoming in denying the allegations, despite his attention having been drawn to our letters to the AG forwarding the relevant documents. Needless to state, the report of the expert panel contains several false statements and incorrect assumptions.

What is equally serious is that some of the members have a very serious conflict of interest in dealing with this matter. As the attached document exemplifies, four of the appointed members cannot, by any stretch of imagination, deal with this matter. Section 9 of the SEC Act expressly precludes any member having a direct or indirect interest in a matter being considered by the commission from taking part in its deliberations. Another member has thought it fit to act by means of a proxy taking cover under whatever view two other members may take!

The present situation cannot continue with information being leaked to certain media whilst my lips are kept sealed and the members with a clear conflict or bias continuing to act ignoring the statutory bar. Moreover, my exclusion from dealings with the privately selected team of experts is clearly a violation of Section 42(2) of the Act in terms of which some members cannot arrogate to themselves statutory powers not vested in them.

In the above circumstances, I have to kindly request you to release me forthwith from my duties as the Director General of the SEC (and also as the DG of the Insurance Board of Sri Lanka). My letter of appointment specifies three months' notice being given; this has been waived in the past and at the time of my confirmation I was assured by the then Chairman, Mr. Ken Balendra, that it will be waived in my case, if so requested. Given the conduct and attitude of some of the members and their modus operandi, I cannot possibly continue to be associated with the SEC. It was, and still is, my understanding that the SEC is an institution which is required to be a model for the rest of the business community.

Thanking you,
Yours truly
Dayanath Jayasuriya

(signed)

Summary of details of conflict of interest

Name of member   Comment
Dr. Nihal Jinasena   Director of DFCC of which the chairman is Mack. According to DFCC's latest annual report, Jinasena & Co. of which Dr. NJ is MD has a loan of Rs. 35 million of which Rs. 17.5 million is outstanding.Also Lodestar (Pvt) Ltd., of which he is the chairman has a DFCC loan of Rs. 299 million outstanding.
Mr. D.K. Hettiarachchi (ex-officio) Nil
Mr. P.M. Nagahawatte (ex-officio) Nil
Mr. Faiz Mohideen (ex-officio) Nil
Mr. L.C.R. de C. Wijetunge   Threatened on more than one occasion to resign if Mack is to be prosecuted. Personally read out and submitted to Jinasena various statements of accounts - not shown to the SEC Secretariat - on behalf of Aitken Spence Garments and the main company.
Mr. Hemaka Amarasuriya Minutes of first special meeting indicate that L.C.R. de C. Wijetunge stated that he contacted Amarasuriya in South Africa and that Amarasuriya had wanted him to inform members that he will abide by "any decision" of Wijetunge and G.C.B. Wijeyesinghe.
Mr. A.D.B. Talwatte (ex-officio) Actively participated notwithstanding that Ernst & Young of which he is a partner are the auditors of Aitken Spence (Garments) Ltd.
Mr. G.C.B. Wijeyesinghe Actively participated notwithstanding that he is the retired senior partner of Ford Rhodes,  the auditors of Aitken Spence (he had retired only two years ago but there were discussions of losses being consolidated over a three year period).
Mr. W.R. Johnson Peiris Nil
Justice Gunawardena Nil
Mr. Lal Nanayakkara Signed report as Chairman, People's Bank. According to Aitken Spence annual report, group has a Rs. 130 million loan.

http://www.thesundayleader.lk/archive/20030202/issues.htm

AG stands by ruling on SEC boss
By Ayesha R. Rafiq
The Attorney General has reiterated to the Securities and Exchange Commission that there is a prima facie case for prosecuting its Chairman Michael Mack and some of his former co-directors at Aitken Spence for insider dealing.

The AG's reiteration on Friday comes more than two months after his original advice that there was a prima facie case against the businessmen. Following the AG's first opinion, in what was an unprecedented move, the SEC, the watchdogs on insider dealing, commissioned an independent panel comprising a retired Supreme Court judge and a member of the accounting profession. The panel exonerated Mr. Mack, and his former directors at Aitken Spence, Norman Gunawardene and Manil de Mel. This opinion was then referred to the AG for his advice.

Lawyers for Mr. Mack and others had interviewed the AG and argued that the AG's original opinion was given without the benefit of some documentation. The Sunday Times learns that the AG has held that such information was in fact available to him when the original opinion was given.

While the SEC acting chairman Nihal Jinasena declined to comment on the AG's opinion, he said he would be acting in the best interests of the Commission. Mr. Jinasena said a meeting of the commissioners had been called for tomorrow to decide on a course of action.

Finance Minister K.N. Choksy said that while he was not yet aware that the AG's opinion had been delivered, he had instructed the SEC to accept the AG's advice as final. It is expected that the SEC will now request the AG to indict the businessmen. The AG was, however, unavailable for comment.

If found guilty, the SEC chairman and others could face imprisonment of upto five years, a maximum fine of Rs. 10 million or both. If the offence is compounded, however, the maximum fine payable would be one third of Rs. 10 million.

Mr. Mack and other co-directors of Aitken Spence have been accused of having information that an important arm within the umbrella of the Aitken Spence Group was in dire financial difficulty, where the projected losses ran into Rs. 150 million (approx.) trade in large amounts of therefore price-sensitive shares before disclosing that information to the public.

In law, any person who is privy to such information cannot trade in shares of that company. The Sunday Times learns that the Attorney General has been very critical of the SEC commissioners taking an unprecedented step in obtaining an independent opinion when other suspects before the same SEC were never given such an opportunity.

An investor has lodged a complaint with the CID on the SEC fiasco and asked that the matter be investigated. But investigating officer SP Kulatunga said it had not been lodged as an official complaint, and in any case they would first have to consult the AG before taking any action.

Meanwhile, SEC member and Singer Chairman Hemaka Amarasuriya said yesterday the AG had held that there were grounds for prosecuting the parties concerned including the SEC chairman.

"I was of the opinion that there was no case and that this was not price sensitive information. I have been proved wrong and based on a matter of principle I am sending in my resignation tomorrow when the commission meets," Mr. Amarasuriya said.

The SEC was probing the sale of Aitken Spence shares during May-June last year by the three former directors of Aitken Spence and their family members.

http://www.sundaytimes.lk/030126/front/ag.html

SEC crisis swept under the carpet

A former market regulator last week warned that the crisis at the Securities and Exchange Commission (SEC) will be swept under the carpet and nobody held accountable.“ This issue (mark my words) will be swept under the carpet. It will be delayed as long as possible till the heat is off. Nobody will be held accountable for this situation,” noted Arittha Wikramanayake, a one-time SEC director general and now a top corporate lawyer.

He said the SEC would never be able to regulate the capital markets. “The entire credibility of the SEC is gone. They won’t be able to (effectively) prosecute anymore,” he told a Colombo seminar on insider dealing organised by Corporate Consultants Ltd.

Wikramanayake called for an early resolution of this crisis and urged that the public be quickly informed of the Attorney General's verdict, which Finance Minister K.N. Choksy has said would end the matter. “If the Attorney General rules in favour of the SEC investigation, then Michael Mack must go.

If the AG rules in favour of the report submitted by a panel appointed by the commissioners, then Dayanath Jayasuriya must go.”

His comments came amidst growing concern about delays on a decision in the SEC insider trading fiasco against Mack, the SEC chairman now on leave of absence, and two other former directors of Aitken Spence.

Chanaka de Silva, a lawyer and partner of Nithya Partners, said it was unfortunate a business community that preached corporate governance was not practicing it.

“One may ask the question … why should directors resign when politicians have been up to all kinds of corruption and not resigned? But in this case it is the preacher (business community) that is not practising what they preach.”

http://www.sundaytimes.lk/030126/ft/1.html#4

SEC needs to regain lost credibility

Whatever the outcome of the insider dealing investigation at the Securities and Exchange Commission turns out to be, a number of issues highlighted by the fiasco needs to be addressed and sorted out if the watchdog body is to regain its lost credibility and investors are to regain confidence in the regulators ability to protect their interests.

It is the investing public that it being asked to take the risk of putting their hard-earned money into the stock market from which listed companies can access relatively cheap funds. It is only natural that they follow this whole affair with keen interest and become wary of the market if regulators are not allowed to do an independent job in taking action against those breaking the law.

The decision of the Attorney General on the second opinion given by a so-called independent team on the SEC investigation and the AG Department's original advice that there was a prima facie case against the accused was being awaited at the time this comment was being written.

One of the fundamental concerns that have arisen from this fiasco is the manner in which the normal procedure or practice at the SEC has been violated. Many questions are being raised about the violation of the usual process adopted in such investigations. In the past the SEC has prosecuted or compounded offences against market players accused of breaking the law, based on the AGs advice subsequent to its investigations. In this probe the SEC's own chairman, and other ex-directors of Aitken Spence accused of the same crime, were given the privilege of a second opinion and allowed to present their case to the state's legal advisor, a privilege not granted to other accused in previous inquiries. The SEC Commissioners owe an explanation to the investing public why this was done.

The legality of one of the Commissioners, Nihal Jinasena, acting as the chairman, following the leave of absence taken by Michael Mack, is also in question. After all, Finance Minister K.N. Choksy has not formally appointed him the acting chairman as he is required to do under the SEC Act. Why was this not done?

Then there is the secretive manner in which decisions regarding the investigation were taken, such as the appointment of the two-member panel that gave the so-called independent opinion on the AG's advice.

There is also the potential conflict of interest concerning those Commissioners who are, or were, serving in audit firms that audited the accounts of companies being investigated by the SEC in this case the Aitken Spence group and its garments subsidiary. This has highlighted the need to appoint to regulatory bodies such as the SEC, people with either no shareholdings or, if that is not practical, for appointees to disclose their share portfolios and to refrain from any trading during the period of their service. Another financial markets, agency is considering a proposal of appointing independent directors to its board. Perhaps it is time for the SEC to do the same. Those involved in the financial markets reforms did in fact make such recommendations to prevent potential conflicts of interest at regulatory bodies, audit companies and rating agencies. One such suggestion was that anyone appointed to the Board of the SEC should give up their duties in other institutions that would constitute a conflict of interest. The market itself has reacted coolly to the crisis. But the strange and tortuous twists and turns the whole affair has taken only serves to highlight the prevalence of the old boy networks and the incestuous ties that bind many a corporate bigwig to each other behind the scenes in our business world.

http://www.sundaytimes.lk/030126/ft/2.html#1

Case fixing at SEC?

Controversy surrounds a move by the Securities and Exchange Commission (SEC) to bypass a decision by the Attorney General’s Department to prosecute its Chairman Michael Mack and two others on charges of insider dealing.

The SEC board met on Friday (Cool evening to decide whether the opinion of a private lawyer should be sought in this regard bypassing the opinion  of the Attorney General.

In this case, Mack (former Chairman of Aitken Spence) and two former directors of the group, Norman Gunawardane and R.M. de Mel, have been accused of insider dealing.

The Solicitor General C.R. de Silva has determined that there is a prima facie case against these individuals, and directed that criminal proceedings  be initiated. It is alleged that while they were on the Aitken Spence board, they sold large parcels of shares in the group’s subsidiaries which recorded huge losses, without divulging the true situation to the public.

Norman Gunawardane is believed to have sold as much as 870,000 shares through the Colombo Stock Exchange. Mack and de Mel are also alleged to have disposed of similar quantities. Gunawardane’s two children Ajit (a director of John Keells and Chairman, Colombo Stock Exchange) and Otara of Odel fame are also accused of selling a large number of such shares in this manner.

In their case, the Attorney General has stated there is a strong suspicion that they too are guilty, but sufficient evidence was lacking to launch a prosecution. Further investigation was therefore deemed necessary. The SEC board meeting in this regard raises serious questions of credibility since it is the watchdog body responsible for monitoring stock transactions.

When The Sunday Leader contacted SEC Director General Dr. Dayanath Jayasuriya on this issue, he said the commissioners are looking into this matter and will take a decision in due course. He declined further comment.

http://www.thesundayleader.lk/archive/20021110/news.htm

Business Basil
Manager - Equity Analytics
Manager - Equity Analytics

Posts : 245
Equity Stars : 2999
Reputation : 44
Join date : 2011-02-25

Back to top Go down

View previous topic View next topic Back to top

- Similar topics

 
Permissions in this forum:
You cannot reply to topics in this forum
Statistics
We have 20021 registered users
The newest registered user is CooperOr

Our users have posted a total of 326913 messages in 50219 subjects
Who is online?
In total there are 144 users online :: 10 Registered, 0 Hidden and 134 Guests

buddikasmart, Captain, DHAVER88, DS Wijesinghe, Equity Suda, kjojo, Neluka Karannagoda, ruwan326, sikka89, TraderCSE

Most users ever online was 541 on Mon Sep 19, 2011 11:29 am
Forum Disclaimer

The information contained in this forum have been submitted by third parties directly without any verification by us. The information available in this forum is not researched or purported to be complete description of the subject matter referred to herein. We do not under any circumstances whatsoever guarantee the accuracy and completeness information contained herein.

www.srilankaequity.com its blogs, forums, subdomains and/or its affiliates and/or its web masters, administrators or moderators shall not in any way be responsible or liable for loss or damage which any person or party may sustain or incur by relying on the contents of this report and acting directly or indirectly in any manner whatsoever.

Trading or investing in stocks & commodities is a high risk activity. Any action you choose to take in the markets is totally your own responsibility, www.srilankaequity.com its blogs, forums, subdomains and/or its affiliates and/or its web masters, administrators or moderators shall not be liable for any, direct or indirect, consequential or incidental damages or loss arising out of the use of this information. The information on this website is neither an offer to sell nor solicitation to buy any of the securities mentioned herein. The writers may or may not be trading in the securities mentioned.