Chairman of the SEC

Chairman of the SEC

Mr. Viraj Dayaratne PC, Chairman
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The year 2021 can be considered as one of the best years for the capital market in Sri Lanka. The Colombo Stock Exchange (CSE) recorded unprecedented highs in both indices and market performance.

Despite the challenges, the securities market continued to demonstrate strong growth momentum, with the All Share Price Index (ASPI) gaining 80.5% which is the highest return recorded since 2010 and the S&P Sri Lanka 20 index (S&PSL20) improving by 60.5% which is the highest ever recorded. Market capitalization also reached Rs. 5.5 trillion which was 37% of Gross Domestic Product (GDP).

The SEC underscored the importance of regulatory adeptness amidst the Covid-19 pandemic and recalibrated its focus on applying regulatory responses that were flexible and timely which brought about market stability and continuity.


Over the past two decades, the securities market has encountered rapid changes to its structure, market participants, and regulation. These developments signaled the need for broad reforms to the existing securities legislation although the SEC had been filling gaps and replacing outdated provisions through amendments in 1991, 2003 and 2009.

The long awaited SEC Act (Act No. 19 of 2021) was passed in Parliament in September 2021 thus repealing and replacing the SEC Act No. 36 of 1987. We expect this well-conceived law to play an important role in expanding the remit of the SEC, modernising the capital market and supporting economic growth and innovation.

The SEC is currently in the process of reviewing existing Rules, Regulations and Standards to be in line with the provisions found in the new Law in order to provide practical measures that will enable it to be enforced effectively.


The pandemic and the resultant lockdowns saw the acceleration of digital adoption in all sectors of the economy including the capital market. The SEC worked with the CSE and the industry to launch the second phase of the digitalization initiative in line with global best practices. This enabled greater flexibility for online account openings for local companies, introduced the Central Depository Systems (Pvt) Ltd (CDS) E-connect, E-Initial Public Offerings (IPO), digitization of corporate actions as well as enabled convenient interfaces via smartphones and other devices.

In fact, during the year under review, there has been greater retail investor participation with a record number of account openings. The active investor base rose to 63,000 while the number of new accounts opened stood at 37,400.


Our investor reach pivoted to digitalbased investor education initiatives. We partnered with the CSE to popularise stock market investments around Sri Lanka and commenced an education campaign mainly through digital marketing channels including social media platforms, influencer marketing, blog posts and CSE Mobile app advertising. Total trades per day increased significantly, as the overall market activity accelerated. The market recorded an extraordinary average of over 33,000 daily trades in 2021.

Consequent to representations made by the SEC, the Tax concessions proposed in the Budget 2021 for companies seeking to list during the year prompted several companies to list in 2021. The CSE saw unprecedented capital raising by companies at the CSE with 29 new listings and capital- raising increased to a record Rs. 124 billion in 2021. Meanwhile, an inaugural issuer forum titled “Founder to Family – Leveraging Going Public” was conducted to engage family businesses and address misconceptions regarding listings particularly addressing the issue of a listing whilst retaining family control. The forum also provided companies with a better understanding of how to access the capital market, as well as the various funding options available on the CSE.


To achieve more domestic and foreign investments, it is important to instill greater confidence in our capital market. In this respect, the SEC’s efforts to conduct a broad based dialogue between academia, the legal community and listed companies to review the corporate governance framework in Sri Lanka could not have been more timely given that previous reforms had been done nearly a decade ago. In the year under review, a public consultation was conducted to obtain views and suggestions from stakeholders on revising Corporate Governance Rules applicable to entities listed on the CSE. Thereafter, an expert committee comprising of representatives of all stakeholders having taken into consideration the submissions made by the public prepared new Corporate Governance Rules. The Commission made certain changes to the draft rules which were then forwarded to the CSE to be included in the Listing Rules which are presently being prepared.


To promote a more effective and efficient process to improve financial inclusion across Sri Lanka, the International Finance Corporation (IFC) collaborated with the Central Bank of Sri Lanka (CBSL) to develop the country’s first National Financial Inclusion Strategy (NFIS). The NFIS is expected to align the different financial inclusion efforts taken by various entities, including the SEC to a single platform. The SEC is playing an active role in the implementation of this national policy and will continue to deliver wellstructured financial literacy programmes as part of the time-bound Action Plan of the NFIS, with the aim of improving living standards and contributing to economic growth. With the launch of NFIS, Sri Lanka joins more than 60 countries, which have launched similar strategies across the world.


Due to the travel restrictions brought about by the Covid pandemic, the SEC in association with the Ministry of Foreign Affairs conducted virtual meetings for staff of overseas Sri Lankan Missions to educate them on how to invest in Sri Lanka’s capital market. This was done so that they could promote portfolio investments in Sri Lanka by the investor community based in the respective countries. Virtual seminars were conducted for the staff of Embassies/ High Commissions in the United States, the United Kingdom, Singapore, Sweden, Abu Dhabi, Japan and the United Arab Emirates. With the relaxation of travel restrictions, the SEC and the CSE, together with the Embassy of Sri Lanka in the UAE organised an “Invest Sri Lanka” forum in Dubai to attract diaspora investments. The strong turnout that was seen of prominent Dubai–based Sri Lankans across multiple industries could be attributed to strong corporate earnings and attractive valuations to name a few.


A Delivery vs Payment (DVP) mechanism which was on the cards for over three years was introduced in August 2021. This was a collaborative effort of the SEC, CSE and the stock broking community.

This important market infrastructure is expected to modernise and mitigate settlement risk while enabling new products on the exchange, thereby placing us on par with global exchange best practices.


Gold has always been considered to be one of the safest investment asset classes. Having considered numerous proposals of stakeholders, the SEC has facilitated the trading of Paper Gold (PG) by providing in-principle approval to facilitate the trading of PG through the Over The Counter (OTC) platform of the CSE. Currently, the framework for introducing trading of PG through the OTC platform is being finalised by the

CSE which is expected to provide a new investment asset class for the market and generate a new source of tax revenue for the Government.

The SEC has granted in-principle approval for Islamic products and the policy framework for its introduction is presently being finalised by the CSE with the technical assistance of the ADB provided through the SEC. Similarly, the SEC is also in the process of developing the policy and regulatory framework for the introduction of Structured Warrants as a possible first step towards the development of the Exchange Traded Derivatives Market. To this end, the assistance of the ADB has been obtained. In principle, approval for Special Purpose Acquisition Companies (SPACs) has also been granted by the SEC and the CSE has been requested to finalise the required policy and regulatory framework. In principle, approval has been granted by the Commission for equity Crowd Funding. The framework having been prepared by the CSE is now ready to be submitted for stakeholder consultation. Approval was also granted to the CSE to facilitate the listing, trading and settlement of foreign currency denominated securities on the CSE and steps are currently underway to make it operative. The introduction of Green Bonds is another initiative that has been approved by the SEC.

Furthermore, approval has been granted to implement a REPO transaction mechanism for corporate debt securities through the OTC trading platform of the CSE. The policy pertaining to covered short selling, stock borrowing and lending has also been approved by the Commission and the CSE is expected to go in for a process of public consultations.

It is imperative to have a Central Counterparty (CCP) if products such as derivatives are to be introduced. The SEC realized that the process of having in place a CCP has to be given priority. Accordingly, steps were taken to appoint a joint committee of the SEC and CSE with the aim of having a CCP for the equity market before the end of 2022. The joint committee is making steady progress in this regard. Several initiatives were also taken to streamline and improve the efficiency of the secretariat during this period. This included the obtaining of analytical tools for the Surveillance Division.


The year under review has been a turning point for the SEC. The new SEC Act will level the playing field, in terms of regulatory requirements for all our stakeholders. We look forward to continuing to facilitate and promote fair, efficient and transparent capital market through a firm commitment to our expanded mandate.

I believe that the SEC is well positioned to respond to the challenges that our market faces today, and in the years to come. I wish to thank His Excellency the President, the Hon. Prime Minister, the Hon. Minister of Finance, the Secretary to the Treasury and other officials of the Ministry of Finance for their support and cooperation. I wish to express my gratitude to the Members of the Commission for their invaluable contribution.

My thanks also go to the Director General Mr. Chinthaka Mendis for his dedicated service, the Directors and members of the staff for their hard work during the past year. Our task would not have been easy if not for the collaboration of our stakeholders and I wish to extend my gratitude to them.

Chairman's office


Phone : 0112 143810