SECURITIES AND EXCHANGE COMMISSION OF SRI LANKA


 

POLICY STATEMENT

The Securities and Exchange Commission of Sri Lanka (SEC) was established in pursuance of 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.

The Commission's objects include:

  • the creation and maintenance of a market in which securities can be issued and traded in an orderly and fair manner;
  • the protection of the interest of investors;
  • the operation of a Compensation Fund to protect investors from financial loss arising as a result of any licensed stock broker or licensed stock dealer being found incapable of meeting his contractual obligations; and
  • the regulation of the securities market and to ensure that professional standards are maintained in such market.

Over time, its powers, duties and functions have expanded and at present it is entrusted with the following:

  • to grant a licence to a body corporate to operate as a stock exchange and ensure the proper conduct of its business;
  • to grant a licence to any person to operate as a stock broker or a stock dealer as, the case may be, and ensure the proper conduct of their business;
  • to grant a licence to a managing company to operate a unit trust and to ensure the proper conduct of the business of such unit trust;
  • to grant a certificate of registration to any person to carry on business as a market intermediary and to ensure the proper conduct of such business;
  • to give general or specific directions to a licensed stock exchange or a licensed stock broker or a licensed stock dealer or a licensed managing company or a trustee of a unit trust or a registered market intermediary, from time to time;
  • to grant compensation to any investor who suffers pecuniary loss arising as a result of any licensed stock broker or licensed stock dealer being found incapable of meeting his contractual obligations;
  • to advise the government on the development of the securities market;
  • to employ such officers and servants as may be necessary for the purpose of carrying out the work of the Commission;
  • to regulate the listing and issue of securities in a licensed stock exchange;
  • to direct a licensed stock exchange to reject any application made to it for listing;
  • to cancel or suspend the listing of any securities or the trading of any listed securities or to suspend the trading of all listed securities for not more than three days at a time, for the protection of investors;
  • to inquire and conduct investigations into any activity of a licensed stock exchange, a licensed stock broker or licensed stock dealer, a licensed managing company or a trustee of a unit trust, a registered market intermediary or any listed public company;
  • to publish findings of malfeasance by any licensed stock broker or licensed stock dealer or a licensed managing company or a trustee of a unit trust, or a registered market intermediary or any listed public company;
  • to implement the policies and programmes of the Government with respect to the market in securities;
  • to acquire in any manner whatsoever and hold, take or give on lease or hire, mortgage, pledge, sell or otherwise dispose of any immovable or movable property; and
  • to request the Registrar of Companies, in the exercise of the powers conferred on it by section 227 of the Companies Act, No. 17 of 1982, to call upon a private limited liability company to become a public limited company; and
  • to regulate take-overs or mergers where such take-over or merger is between one or more listed companies or where at least one of the parties involved in such take-over or merger is a listed public company;
  • to conduct investigations into any alleged violation or contravention of the provisions of this Act or any rule or regulation made thereunder by any person; and
  • to do all such other acts as may be incidental or conducive to, the attainment of the objects of the Commission or the exercise of its powers under this Act.

Apart from Carrying out its regulatory functions, the SEC in its endeavor to promote and develop the Capital Market of Sri Lanka is responsible for the implementation of the recommendations outlined in the Capital Market Master Plan.

 

RULE MAKING POWER

The Commission is also authorized to make rules as may be required from time to time for the purpose of ensuring orderly and fair trading in securities and the protection of investors interest. Under this provision the Commission has framed rules pertaining to listing and continuing listing of securities, the operation of open ended unit trusts and mergers and acquisitions.

 
OFFENCES

Insider Dealing is an offence under the Securities and Exchange Commission Act (as amended) as is any breach of provisions of the SEC Act or any Rules or Regulations formulated in the terms of the Act. The offender may be subject to a fine not less than one million rupees or to imprisonment of either description for a term not less than two years and not exceeding five years or to both such fine and imprisonment.


Any person who is found guilty of an offence under this Act for which no penalty is expressly provided for under this Act, shall be liable on conviction after summary trial by a Magistrate to imprisonment of either description for a period not exceeding five years or to a fine not less than fifty thousand rupees and not exceeding ten million rupees or to both such imprisonment and fine.

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