SEC taps Interpol to track market offenders
The Securities and Exchange Commission (SEC), in a first time move, has sought the assistance of Inter national Criminal Police Organisation (Interpol) to crackdown on a Sri Lankan capital market offender.
Interpol was contacted to summon one person based in Ireland to the Sri Lankan courts, according to SEC sources. Raw from the reputational dent it faced owing to lapses in probes, the SEC went to courts against him and another manipulator based in Colombo on Tuesday, after six long years.
But as they say, it’s better late than never. The regulator filed action in the Magistrate’s Court Colombo Fort against two investors who are among the top 10 shareholders on charges of market/price manipulation on doctor channelling company, E-Channelling PLC.
A media statement by the SEC said that the Magistrate’s Court Colombo Fort has issued summons on the two accused. SEC sources told the Business Times that the said transaction was done on June 28, 2013 between two brothers-in-law, Ireland-based Dr. Muhammed Bafiq Nizar and Mohamed Imtiaz Samsudeen. Dr. Nizar sold nearly 4.5 million shares of E- Channelling to Mr. Samsudeen via an online trading account.
According to the sources, all other trading orders had been matched at price ranging between Rs. 5, Rs. 6 and Rs.6.10 per share apart from the said particular trade which was at Rs. 3.30 per share.
“The action was filed on the basis of evidence elicited during the course of an investigation conducted by the SEC and upon receiving the formal opinion of the Attorney General. Rule 12 of the SEC Rules published in the Gazette Extraordinary No. 1215/ 2 dated 18th December 2001 which prohibits any person from creating or causing to create or from doing anything that is calculated to create a false or misleading appearance or impression of active trading or false or misleading appearance or impression with respect to the market or the price of any securities listed on a licensed stock exchange,” the SEC statement added.
The matter is pending in Court and shall be taken up next on August 29.
These moves came on the back of the International Monetary Fund ( IMF) advising the regulator to restructure the existing enforcement programme and bring several high- profile criminal actions rapidly.
Issuing the technical assistance report for enhancing the effectiveness of the Sri Lankan securities market enforcement programme in May, the IMF said it is crucial that the SEC adopt enforcement actions for credible deterrence in the capital market.
The IMF suggested an adaptation of criteria for prioritising cases and publication of the results of enforcement actions, policies, and procedures.
“At the moment, the investigation team has prioritised several re-opened matters involving trading activity in 2010– 11, which was a highly volatile period for the Colombo bourse. These matters had been prematurely closed without thorough investigation,” the report said noting that SEC has determined that it is key to regaining public confidence for it to take another look at these matters.
In January the regulator charged an employee of a stockbroking firm for failing to ‘show up’ for an inquiry. The SEC had summoned the said individual to record a statement pertaining to a stock market offence. He had evaded coming over to the SEC for a long period. The SEC then on Friday charged him at the Fort Magistrate Court, after which he had agreed to cooperate with the regulator. Thereafter the charge was withdrawn. Continued from Page 1
Penalties for failure to furnish returns have been increased up to Rs. 400,000 under the new Act from Rs. 50,000 fine previously, he said, adding that this penalty provision was not enforced in most of the previous cases.
If a person is convicted for more than one offence under this Act, the maximum term of imprisonment imposed for the offences shall not exceed five years, he disclosed.
A person or an officer attached to IRD or other ministry or department who willfully aids, abets, assists, counsels, incites or induces another person to commit a criminal offence under this section of the Act shall be liable on conviction to the same punishment as if the offence had been committed by that person.
A person who willfully impedes or attempts to impede the IRD in the administration of this Act shall be guilty of an offence and shall be liable on conviction to a fine not exceeding Rs.1 million or to imprisonment for a term not exceeding one year or to both.
A penalty of up to 2 per cent of the total transaction value could be imposed on any Sri Lankan company that violates transfer pricing rules by not disclosing any information required for transactions between related parties.
The previous “Income Tax Ordinance” does not make the principal officer of a company chargeable out of his personal assets with income tax levied on the company’s assessable income, he disclosed.
If an entity fails to pay tax on time, every person who is or has been a manager of the entity is jointly liable with the entity and every other such person for payment of the tax. This inflates tax liability over diverse parties outside the actual tax defaulter.