Capital Market Development

The Capital Market Development Division was established in 2007 to carry out a number of policy initiatives under the Capital Market Master Plan. The main tasks of the division include proposing and facilitating the implementation of policy initiatives to develop the capital market such as:

• Broadening and widening the issuer and investor bases;
• Advocating improvements to the market infrastructure;
• Enhancing liquidity and efficiency in the market; and
• Introducing new products

The Division jointly works with external regulatory agencies and missions to champion focused initiatives on the development of the securities market.

Corporate Affairs

The Corporate Affairs division is responsible for ensuring that investors are provided with material information in order to make informed investment decisions. The division reviews market disclosures and other information that listed companies are required to disseminate to the public to reduce asymmetry of information. The division conducts a Financial Reporting Surveillance Programme aimed at improving the quality of the financial reporting of the listed companies so that:

• The Listed Companies’ financial disclosures are clear, accurate and comprehensive.
• Investors can have confidence in the credibility of financial information provided by the listed companies.
• High quality financial reporting will contribute to the integrity of Sri Lanka’s Capital Market. The Financial Reporting Surveillance Programme further involves a review of the financial reporting practices of Listed Entities for the purpose of forming a view on:
• The level of compliance with the Sri Lanka Accounting Standards (SLFRS) as specified in the Colombo Stock Exchange (CSE) Listing Rules.
• Whether any breaches of the SLFRS identified in those financial statements are likely to have an impact on the true & fair view of the financial status and are likely to be materially misleading to users in the context of information disclosed as envisaged under the SEC ACT and therefore require enforcement action.
• The transparency, clarity, comprehensiveness of financial reporting disclosure requirements and the overall quality of financial reporting by Listed Entities.

The division inquires and resolves complaints of investors as well as processing and approving off – the – Floor transfers of Securities. It is also responsible for approving the issuance of unlisted securities of Listed Entities under Section 81 of the SEC Act and considers applications received under Section 80 of the SEC Act. The responsibilities of the Division include receiving and collating input on policy issues including the undertaking of comparative surveys in order to ascertain the present status, including gaps, in the Capital Market based on such input. The Unit is also responsible for the analysis, formulation and recommendation of policies, monitoring of policy implementations and providing necessary assistance to other divisions in decision making. This also includes information relating to regional and international trends and developments as well. Further, Corporate Affairs Division provides recommendations to the Commission on Deferment of Suspension Applications received as per Enforcement Rules of CSE. Division also shares observations with the CSE relating to draft Prospectuses for Debentures, Initial Public Offerings and Rights Issue Circulars, including observations on introductory documents.

External Relations and Capital Market Education

The SEC is mandated to protect the interest of investors. To achieve this goal we undertake extensive investor education programmes to raise awareness on the benefits and risks associated with investing in the capital market as well as provide investors with the requisite skills, knowledge and tools to make informed investment choices. Our investor education programmes are designed to cater to various investor segments including students, undergraduates, investors, teachers and the public. We utilize the print and electronic media as well as publications, seminars, workshops and investor – oriented events.

The capital market education arm of the SEC has been entrusted with the task of providing professional education in order to enhance knowledge and skill levels of market professionals, investors, issuers and market institutions. We have introduced a qualification framework taking into account the changes the Sri Lankan capital market has been facing in the recent years and aims to ensure that professionals practicing in the industry possess the competencies essential to work in the capital market. The framework will also assist to develop a pool of candidates who are trained in fundamentals of capital markets through the introduction of a minimum level of proficiency whilst assisting practitioners to progress to more advanced qualifications through the development of continuous professional development (CPD) programmes. The framework sets out three levels of qualifications, Certificate in Capital Market (CCM), Registered Investment Advisor (RIA) and Diploma in Capital Market (DCM). In addition, we have also introduced Programmes for potential and seasoned investors with the intention of providing them with theoretical and practical aspects of share trading.

The Education arm also have a very close relationship with the National Universities in Sri Lanka and have provided resources to encourage research among academics and undergraduates with the long-term objective of developing the capital market of Sri Lanka.

Finance and Administration

The Finance and Administration Division ensures that the Commission and its divisions function in a smooth and efficient manner. The division has the responsibility to ensure robust administrative and financial management system by designing and implementing a sound system of internal controls over its processes. Key functions of the division inter alia include the following;

• Financial planning, budgetary controls including cost control
• Management of the funds of the Commission and its statutory funds efficiently & effectively while upholding a sound financial system with accountability and transparency
• Processing of monthly payroll of staff
• Submission of financial reports on time and related financial compliance reporting
• Tax management
• Procurement management
• Supervision of general maintenance and upkeep of the Secretariat

Human Resources and IT Division

With a view to achieving the excellence in discharging the mandate of the SEC, the Human Resources Division strives to recruit the right people for the right positions at the right time. The human capital of the SEC is entrusted with developing and regulating the capital market of Sri Lanka.

Since the staff is the wealth of any organisation the Division also focuses on training and developing the staff on continuous basis locally as well as internationally to keep abreast with new trends in the regulation and the development of capital markets.

The Division is also responsible for making recommendations to the Director General and the Members of the Commission regarding promotions to the staff based on their long years of service as well as the staff welfare matters.

Further, the Division is entrusted with administering the Information Systems at the SEC and is responsible for maintaining the IT infrastructure including SEC Primary Data Center and Disaster Recovery Site.

Investigations

The main function of the Investigations Division is to conduct investigations into referrals either internal or external and complaints relating to any suspected/alleged irregularity under the provisions of the SEC Act No. 19 of 2021 and/or Rules and Regulations made thereunder as well as the Rules and Regulations promulgated under the SEC Act No. 36 of 1987 (if such Rules and Regulations are not inconsistent with the current Act) in order to ascertain whether there exists evidence to institute legal action or to take any other action under the provisions of the SEC Act No. 19 of 2021 against those who have violated the provisions of the SEC Act, Rules and/or Regulations made thereunder.

Legal and Enforcement

The Legal Division handles litigation, capital market legal policy initiatives and current regulatory functions. The Legal Division facilitates the institution of proceedings in Court and defends the interests of the Commission in Court as and when necessary. The Division is responsible for reviewing and proposing amendments to the SEC Act and other related laws and rules to ensure securities laws are in line with IOSCO standards and international best practices. Ongoing regulatory functions include advising the secretariat and the Commission on all legal matters, issue directives to regulatees and Listed Public Companies, administration of the Takeovers and Mergers Code and process approvals for global and regional funds investing in listed securities. Additionally the division drafts commercial agreements and engages in contract negotiations for the Commission. The Legal Division is entrusted with the responsibility of implementing enforcement actions against wrong doers for violation of securities laws , regulations and rules as determined by the commission.

Supervision

The Supervision Division is responsible for the Licensing/Registration, Supervision, and Compliance Monitoring and On Site/ Off Site Examinations of Stock Broking Companies, Unit Trust Managing Companies and Market Intermediaries (Investment Manager, Margin Provider, Underwriter, Credit Rating Agency and Clearing House). The supervisory role of the Division involves both On Site and Off Site supervision on the financial viability and business conduct of market participants towards investor protection and thereby building investor confidence in the Capital Market. On site/Off site supervision is carried out adopting a Risk Based supervisory methodology focusing on different risk categories such as Prudential, Liquidity, Financial, Credit, Operational, Legal and Reputational Risk with emphasis on compliance of market participants with applicable Rules & Regulations to strengthen market oversight.

Surveillance

Market integrity is an important regulatory objective of securities regulators, and is critical for the well-functioning of any capital market. Market surveillance in particular, plays a crucial role in detecting and deterring possible vulnerabilities to a capital market that take place due to anomalous trading activity, including market and price manipulation, insider trading and front running.

The SEC uses a real-time surveillance system to detect unusual trading activities based on price and volume movements and to ensure that transactions are done in conformity with market rules.