“market intermediary” means an underwriter, a margin provider, a credit rating agency, an investment manager or a clearing house.
A person who performs the functions of a clearing house which shall be responsible for handling all securities deposited with it and which permits or facilitates the settlement of securities transactions of a licensed stock exchange.
Any person who is carrying on or who intends to carry on business as a market intermediary shall register with the Commission for such purpose.
An application for the purpose of registration under subsection (1) shall be made to the Commission in such form, together with such documents and such fee as may be prescribed by the Commission from time to time in that behalf.
No person shall be registered as a market intermediary unless he complies with the terms and conditions set out in Part V of the Schedule hereto.
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.
General Regulatory Standards Applicable To Registered Market Intermediaries
As at 29th September 2015
01. The Regulatory Standards set out herein shall apply to all Market Intermediaries registered under Section 19 A of the Securities and Exchange Commission of Sri Lanka Act No. 36 of 1987 (as amended) and shall be deemed as requirements or criteria to be complied with, in accordance with Part V to the Schedule of the Securities and Exchange Commission of Sri Lanka Act (the SEC Act). Every Market Intermediary as defined under Section 55 of the SEC Act shall be bound to comply with:
the standards set out herein and any amendments or additions thereto;
other terms and conditions contained in Part V to the Schedule of the SEC Act; and
all directives issued and that may be issued as applicable to Market Intermediaries from time to time by the Commission.
02. No person shall engage in any activity of a Market Intermediary or hold himself out as doing so unless he is a holder of a Certificate of Registration issued by the Securities and Exchange Commission of Sri Lanka as a Market Intermediary belonging to the category of that regulated activity. 03. The SEC may waive compliance with any of the standards set out herein after having satisfied itself that the attendant circumstances justify such waiver.
04. A Registered Market Intermediary shall pay such registration fee in respect of each regulated activity in such manner as may be specified or prescribed.
05. 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.
06. All Registered Market Intermediaries shall comply with all general or special directives issued to them by the Commission and must observe both the letter and spirit of the directives issued.
07. No Registered Market Intermediaries shall contravene any written law enacted for the protection of the members of the public against financial loss by dishonesty, incompetence or malpractice.
08. All Registered Market Intermediaries shall always furnish true information to the Commission.
09. 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.
10. No Registered Market Intermediaries shall 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.
11. All Registered Market Intermediaries shall always strive to act in the best interests of clients.
12. All Registered Market Intermediaries shall always strive to act efficiently, honestly and fairly.
13. 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.
14. All Registered Market Intermediaries shall maintain a register containing the names of the individuals referred in 13 above in such form and manner as may be specified by the Commission.
15. Where the Commission appoints a person for purposes of supervising the compliance by a Market Intermediary in terms of the provisions of the SEC Act, the terms and conditions set out in Part V to the Schedule of the SEC Act and the criteria stipulated under this Directive, 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 the terms and conditions set out in Part V to the Schedule of the SEC Act and the standards stipulated herein or under any other Directives which are applicable to Market Intermediaries; and
(2) take such steps as are necessary to ensure compliance with the provisions of the SEC Act, the terms and conditions set out in Part V to the Schedule of the SEC Act and the standards stipulated hereunder all other directives as may be applicable to the Market Intermediaries.
18. 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;
(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; and
(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.
19. 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
(3) 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.
20. 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.
21. A Registered Market Intermediary with intent to defeat the purposes of 20 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.
22. Without prejudice to the generality of the duties imposed under Section 25 of the SEC Act, a Registered Market Intermediary shall on the occurrence of any one or more of the following events shall give to the Commission written notice, forthwith 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 the provisions of the SEC Act, Part V to the Schedule of the SEC Act and the standards stipulated herein or any other Directive issued by the Commission from time to time;
(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, liquidator 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;
(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 within or outside of Sri Lanka; or
(8) becomes an un discharged bankrupt.
23. 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.
24.(1) Subject to subsection (2), below, 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.
25. 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; or
(2) in the case of an individual holder of a Certificate of Registration, if the individual dies.
26. 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, Act No. 18 of 2003 and Act No. 47 of 2009 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,
The aggregate value of;
SEC approved subordinate debt
Total assets minus total liabilities adjusted by deducting any other item as specified by the SEC 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.