Sri Lanka SEC loosens credit, lifts broker stock sales curbs

The SEC said brokers could now extend credit to clients up to three times the net capital (after deducting 50 percent of the value of fixed assets) without deducting debtors from net capital.

A rule that imposed a 20 percent upper limit on off market transactions (crossings) on the Colombo Stock Exchange has been lifted.

The SEC has also lifted a rule that stopped executive directors, employees and spouses and their nominees of broking firms from selling shares purchased in under six months.

Two heads of the SEC was ousted over the past year after sections of brokers protested to Sri Lanka's president as the regulator tightened rules credit and started to take action against 'pump and dump' scams.

The benchmark index rose steeply over the last month, following the appointment of a new SEC chairman, but stocks have lost ground over past week amid some profit taking.

READER COMMENT(S)

6. LOSER market Oct 09

Call it the LOSER Market coz thats what it is.......only suckers buy into penny stocks. Pigs do get slaughtered and the retailers are a hybrid of sheep and pig

5. Niro Oct 09

@ Hara:
There is no shortage of idiots in this country! Worst part is SEC conducts 'seminars' to encourage people to invest in the stock market. Would SEC employees themselves genuinely believe the 'Invest at CSE' message they are peddling is credible and worthwhile?

These SEC induced gullible 'investors' are rich pickings for brokers to preform pump n' dump tricks.

4. abc Oct 09

Only people who are both ignorant and greedy get "pumped and dumped". Most of these so called retail investors who everyone cries about are averse to investing in fundamentally sound stocks (no matter how much the broker advises them) and they dont have any holding power.

Most of the time its they who put pressure on the broker to find stocks that can "run". There's no point blaming brokers, regulators or manipulators because of these people. They need to get burnt to learn their lesson, but it seems that some of them no matter how burnt they get keep coming back for more, in which case they seem to have money they are willing to lose.

@ kanchana. You need to learn the basics of accounting. Net assets of a company does not mean that you have it in cash, most often you wont. So it can be represented by any assets/property of the company including cars. If the regulator doesnt want fixed and other assets of a broker to be used in the formula they should come up with a revised formula based on "unencumbered liquid assets" instead of "net assets".

3. hara Oct 09

Pump and dump only happens when idiots buy overvalued shares out of profit for greed.

Its not the regulators fault. The previous idiot regulators tried to regulate this but it cant be done. It just ruins markets(over regulation) Investors should be wise if you buy something dont blame everyone else blame only yourself

2. sham Oct 09

Description of pump and dump in Wiki -
Pump and dump schemes tend to take place either on the Internet including e-mail spam campaigns or through telemarketing from "boiler room" brokerage house.

Often the stock promoter will claim to have "inside" information about impending news. Newsletters that purport to offer unbiased recommendations then tout the company as a "hot" stock.

Unwitting investors then purchase the stock, creating high demand and raising the price. This seemingly "real" rise in prices can entice more people to believe the hype and to buy shares as well.

When the people behind the scheme sell their shares and stop promoting the stock, the price plummets, and other investors are left holding stock that is worth significantly less than what they paid for it.

Fraudsters frequently use this ploy with small, thinly traded companies — known as "penny stocks,"

1. Kanchana Oct 09

Burupola will start again.
It is common practice for some broker houses to buy junk shares and pump it up and dump it on the retail investors who are advised by the same broker house advisers/analysts. The previous law made it difficult for that to happen. Also it was news that some brokers even put their cars into net assets.

Anyway what would you expect when the brokers appointed the regulators themselves.