“market intermediary” means an underwriter, a margin provider, a credit rating agency, an investment manager or a clearing house.
“Investment manager” means a person who for a fee or commission engages in the business of managing a portfolio of listed securities on behalf of an investor or advises any person on the merits of investing, purchasing or selling listed securities, but shall not include the licensed managing company of a unit trust
On receipt of an application for registration, the Commission having considered the particulars stated therein and where it appears necessary having given the applicant an opportunity of being heard, shall by written notice inform the applicant whether he is being registered as a market intermediary or not, and where he is registered as a market intermediary, issue him with a certificate of registration valid for a period of one year effective from the date of issue of such certificate. Every person issued with a certificate of registration is referred to in this Act as a “registered market intermediary”.
A registered market intermediary may three months prior to the expiry of the registration make an application to the Commission in the prescribed form, together with the prescribed fee for a renewal of the registration.
As at 15th Feburary 2013
These Rules shall apply to all Market Intermediaries interpreted under Section 55 of the Securities and Exchange Commission of Sri Lanka Act No. 36 of 1987 (as amended) , as Market Intermediaries and have obtained a certificate of Registration under Section 19A of the said Act.
These Rules are supplementary to the terms and conditions set out in Part V of the Schedule to the Securities and Exchange Commission of Sri Lanka Act. As such Market Intermediaries are required to comply both with the terms and conditions set out in Part V of the Schedule to the Securities and Exchange Commission of Sri Lanka Act and these Rules.
05. A Registered Market Intermediary shall pay such registration fee in respect of each regulated activity in such manner as may be specified by the Commission.
06. No holder of a Certificate of Registration as a Market Intermediary shall carry on any regulated activity in respect of the registration without the written consent of the Commission if the minimum financial requirements as may be specified by the Commission are not met.
07. All Registered Market Intermediaries shall comply with all general or special directives and guidelines issued to them by the Commission.
08. All Registered Market Intermediaries shall not contravene any written law enacted for the protection of the members of the public against financial loss by dishonesty, incompetence or malpractice.
09. All Registered Market Intermediaries shall always furnish true information to the Commission.
10. All Registered Market Intermediaries shall not act fraudulently or dishonestly in the performance of the regulated activity and shall not engage in any business practices appearing to the Commission to be deceitful or oppressive or otherwise improper ( whether unlawful or not) or which reflect in the opinion of the Commission discredit on its or his method of conducting business .
11. All Registered Market Intermediaries shall not engage or be associated with any other business practices in such a manner as to cast doubt on its or his competence and soundness of judgment.
12. All Registered Market Intermediaries shall always strive to act in the best interests of clients.
13. All Registered Market Intermediaries shall always strive to act efficiently, honestly and fairly.
14. All Registered Market Intermediaries shall ensure that all directors and individuals employed to carry on the registered activity shall be fit and proper persons as may be determined by the Commission and shall possess the requisite qualifications as required by the Commission.
15. All Registered Market Intermediaries shall maintain a register containing the names of the individuals referred in Rule 15 in such form and manner as may be specified by the Commission.
16. All Registered Market Intermediaries shall comply with the Rules, Directives and Guidelines issued by the Commission in respect of the carrying on of the particular regulated activity of the Market Intermediary.
17. Where the Commission appoints a person for purposes of supervising the compliance by a Market Intermediary of the Rules, Directives and Guidelines issued by the Commission, the Registered Market Intermediary shall;
(1) Furnish the authorized person with any information that the authorized person may require to determine whether the Market Intermediary has complied with the provisions of the SEC Act (as amended) or with any Rules, Directives or Guidelines issued by the Commission which are applicable to Market Intermediaries; and
(2) Take such steps as are necessary to ensure compliance with the provisions of the SEC Act or any Rules Directives or Guidelines issued by the Commission
18. A Registered Market Intermediary shall furnish such returns and provide such information relating to its business as the Commission may require.
19. The Commission may specify that any information required under the above mentioned section shall be submitted within such period , at such intervals , in such manner or in such form as the Commission may specify and the Registered Market Intermediary shall comply with such requirement
20. A registered Market Intermediary shall –
(1) Maintain or cause to be maintained , such accounting records and other books as will sufficiently explain the transactions and financial position of its business and enable true and fair profit and loss accounts and balance sheets in keeping with the Sri Lanka Accounting Standards to be prepared from time to time ; and
(2) Maintain or cause to be maintained such accounting records and other books in such a manner as will enable them to be conveniently and properly audited.
(3) Retain such accounting records or other books as may be required to be maintained by the Commission for a period of not less than 6 years.
21. It shall be the duty of all Registered Market Intermediaries to furnish to an auditor or to an independent auditor appointed by the Commission
(1) All the information within its or his knowledge or which it or he is capable of obtaining or
(2) Any information which the auditor or independent auditor requires to enable him to carry out his duties and
The Market Intermediary shall ensure that all the information which is furnished to the auditor or independent auditor as the case may be is not false or misleading in any material particular.
22. Where the Commission having considered that it is in the interests of the Registered Market Intermediary or those of its or his clients, appoints an independent auditor or such other person or a body of persons to examine, audit and report either generally or in relation to any particular matter , upon the books, accounts and records of, and assets held by the Market Intermediary, it shall be the duty of such intermediary
(1) To produce any books, accounts and records of, and any assets held by the intermediary relating to his business ; and
(2) Shall answer all questions relevant to an examination and audit which are put to him by the independent auditor or such other person appointed by the Commission.
23. A Registered Market Intermediary with intent to defeat the purposes of Section 23 above or with intent to prevent delay or obstruct the carrying out of any examination shall not
(1) Destroy, conceal or alter any books or property relating to the business of the Market Intermediary ; or
(2) Send or attempt to send or conspire with any other person to send out of Sri Lanka any such books or any property of any description belonging to or in the disposition of or under the control of the Market Intermediary.
24. A Registered Market Intermediary shall on the occurrence of any one or more of the following events shall give to the Commission written notice , not later than fourteen days setting out the particulars of the event;
(1) If the Registered Market Intermediary is in the course of being wound up or otherwise dissolved whether within or outside Sri Lanka or ceases to carry on the business to which the registration relates;
(2) Where the Market Intermediary has failed to comply with any requirement under the SEC Act or of any Rules , Directives or Guidelines issued by the Commission;
(3) where any information or document furnished to the Commission is false or misleading; or there is any change in any information or document furnished to the Commission
(4) where any execution against the Market Intermediary in respect of a judgment debt has been returned unsatisfied in whole or in part;
(5) where a receiver or an equivalent person has been appointed in respect of any property of the Market Intermediary
(6) where the Market Intermediary whether within or outside Sri Lanka has entered into a compromise or scheme of arrangement with its creditors being a compromise or scheme of arrangement that is still in operation ; and
(7) where the directors , or the chief executive officer has been convicted of any offence involving fraud or dishonesty , or a violation of securities law or
(8) Becomes an undischarged bankrupt.
25. Where a Registered Market Intermediary ceases to carry on the business in all or any of the regulated activities to which the certificate of registration relates, shall return the certificate of registration to the Commission within fourteen days of the date of the cessation.
(1) Subject to subsection (2), a Registered Market Intermediary may surrender the certificate of registration by sending it to the Commission together with a written notice of its surrender.
(2) The surrender of a certificate of registration shall not take effect until the Commission is satisfied that adequate arrangements have been made to meet all the liabilities and obligations of the Registered Market Intermediary that are outstanding at the time when the notice of surrender was given by the Market Intermediary.
27. A Certificate of Registration of a Market Intermediary shall be deemed to be Revoked
(1) If the holder of the certificate of registration is wound up or otherwise dissolved whether within or outside Sri Lanka
(2) In the case of an individual holder of a certificate of registration, if the individual dies.
28. The words and terms defined in the Securities and Exchange Commission of Sri Lanka Act No. 36 of 1987 as amended by Act No. 26 of 1991 and Act No. 18 of 2003, shall unless the context so requires have the same meaning assigned to it in the said Act.
“Commission” means Securities and Exchange Commission of Sri Lanka;
“Connected Party” means the parent, subsidiary or an associate company of such party;
“Liquid Capital” means cash or investments which can be readily converted to cash such as bank/call deposits, re-purchase agreements with maturity of less than three months, commercial papers which are endorsed or guaranteed by a licensed commercial bank or licensed specialized bank with a term to maturity of less than three months and government issued securities with a term to maturity of one year or less;
“Net Capital” means,
“Rules” mean these Rules as may be amended from time to time;
“SEC” means the Securities and Exchange Commission of Sri Lanka;
“SEC Act” means the Securities and Exchange Commission of Sri Lanka Act No.36 of 1987 as amended from time to time;
“Single Client” in the context of a corporate body means the borrowing company its parent and subsidiary company and in the context of a natural person means the borrower, his/her spouse and dependent children.
As at 15th Feburary 2013
The Rules set out in this Part shall be applicable to any person carrying on business as Investment Managers.
Applications by Individuals shall be considered for registration by the SEC on the merits of each case.
(1) A Registered Investment Manager shall not appoint an individual as a director or a person dealing with clients for and on behalf of an Investment Manager, if such person has been:
(a) convicted by any Court of Law in Sri Lanka or abroad subsequent to a finding of guilt for the commission of any offence which involves fraud, deceit or dishonesty; or
(b) found to have committed or been connected with the commission of any act which involves fraud, deceit or dishonesty by anybody with regulatory or supervisory authority;
(i) established by law in Sri Lanka or abroad; or
ii) constituted under law as a commission of inquiry, tribunal or other similar body; or
(iii) by any professional body which in the opinion of the SEC is of an established and credible stature; or
(c) compounded in terms of the SEC Act (as amended) during the past 3 years preceding the date of the appointment; or
(d) found guilty of a capital market offence by a court of law in terms of the SEC Act; unless the prior approval of the Commission is obtained for such appointment. The Commission on an application made under this provision by a Registered Investment Manager, may grant approval for such person to be appointed notwithstanding the above said prohibition under exceptional circumstances.
(a) A Registered Investment Manager shall not allow an individual to continue as a director or a person dealing with clients, for a period as determined by the Commission, if such person, subsequent to his appointment as a director or a person dealing with clients has been;
(i) convicted by any Court of Law in Sri Lanka or abroad subsequent to a finding of guilt for the commission of any offence which involves fraud, deceit or dishonesty; or
(ii) found to have committed or been connected with the commission of any act which involves fraud, deceit or dishonesty by anybody with regulatory or supervisory authority;
(b) For the avoidance of doubt, the period in which a person described in 01 (2) (a) above shall be barred from functioning as a director or a person dealing with clients for and on behalf of a Registered Investment Manager may be ;
depending on the gravity of the offence, the impact of such offence on the market or other factor which the Commission shall deemed to be relevant considering the circumstances surrounding the commission of such offence.
02. Every Director and /or employee of an Investment Manger who are involved in managing client funds shall posses the qualifications and/or experience as set out in (a) or (b) below;
(ii) experience in the financial/securities market for a minimum period of two years.
(b) Experience in the financial/securities market for a minimum period of seven years.
An individual who wishes to obtain a registration as a Market Intermediary shall posses the qualifications/experience specified in rules 1 above.
03. Every Investment Manager shall ensure that a minimum of two persons possessing qualifications and/or experience set out in these Rules are employed to manage client funds.
The SEC may direct an increase in the number of such qualified personnel on account of the volume of business proposed to be undertaken or undertaken by such an Investment Manager.
04. An Investment Manager shall not engage in any other business other than that of an Investment Manager unless prior written approval of the Commission is obtained..
06. An Investment Manager shall ensure that key duties and functions of the front office and back office are clearly segregated to avoid any conflicts of interest.
07. An Investment Manager shall maintain proper systems, processes and human resources suitable and adequate to support the due functioning of its business as an Investment Manager at all times.
(A) An Investment Manager shall ensure that it has systems that are capable of Issuing clients with regular portfolio valuations and notification of all transactions made on behalf of the client.
(B) An Investment Manager shall provide its clients with current and accurate portfolio valuations on a monthly basis.
16. An Investment Manager shall provide SEC with information as set out as follows:
17. All Investment Managers shall immediately notify the SEC of the percentage holdings in it by its parent/owning company(s), subsidiary company(s), associate company(s) and partnership(s) and of shareholders holding more than 20% or more of its equity.
All Investment Managers shall,
The Investment Management Services Guide shall inter alia include the following,
The written contract between the Investment Manager and the clients shall inter alia include the following,