Financial analysts and experts have urged the necessity for a mechanism to keep a check on Registered Investment Advisors (RIAs) employed by stock brokering houses and market intermediaries in order to ascertain their standards, ethics and background information for the benefit of market investors and stakeholders.
Speaking to The Nation Gain, Chartered Financial Analyst and Director, Candor Equities, Ravi Abeysuriya stated that Sri Lanka needed a platform to regulate the RIA’s in Sri Lanka, for the benefit of those investing on stock market.
“The Securities Exchange Commissions of countries such as the USA have a website which provides details of stock brokering advisors, their qualifications, and information with regard to any investigations on them. Sri Lanka needs a mechanism like that,” he said.
When contacted, Deputy Director General, Securities and Exchange Commission of Sri Lanka, Dhammika Perera also admitted that there needed to be a mechanism to monitor the conduct of brokers. “We do have certain broker conduct rules and administrative sanctions. But they should be combined, strengthened and put in black and white,” he said.
“The stockbrokers are certified, but that is inadequate. They could play out clients while being in a firm and then move on to another firm. Such instances need to be monitored and addressed,” Perera said.
Accordingly, Sri Lanka has 29 stockbroker firms. “Therefore, it is not difficult to formulate a mechanism to do a background check on individuals attached to firms,” Perera added.
He added that there was no platform for the public and stakeholders to ascertain their performance, conduct and standards. “The industry too can formulate the mechanism as well,” he added.
Chairman, Colombo Stock Brokers Association (CSBA), Dihan Dedigama when contacted stated that the CSBA had an informal system which looked into the ethics and standards of brokers. “But we welcome any system that would improve the quality of our work,” Dedigama said.
Addressing a seminar titled ‘Stock Market: regulatory Frame Work and Investment Challenges’, organized by the Ceylon Chamber of Commerce (CCC) recently, Abeysuriya pointed out that the absence of such a mechanism was a drawback for current and potential investors as there was no system to provide information on their performance.
He further stated that Sri Lanka was among the lowest in terms of domestic stock market participation adding that the lack of trust on the capital market played a key role in the very low level of public participation.
He also stated that the perception that the market was manipulated and controlled by a ‘mafia’ also played a crucial role in their lack of trust on the system.
Abeysuriya in his presentation also spelt out key reasons contributing to the lack of public trust. Accordingly, the lack of ethical culture within firms was a key problem. In addition, market disruption, poor government enforcements and poor government regulations also play key factors in the lack of trust.
He suggested that factors such as transparency and open business practices, responsible actions to address the above mentioned issues, and ethical business practices along with voluntary code of ethics would instill confidence of the public on the market and increase their participation.