"The effectiveness of the SEC still appears to be hampered by a lack of staff to undertake its duties fully and effectively," the report said.
The difficulties will increase with the new legal amendments that widen the scope of the SEC's responsibilities.
These give the SEC more powers to regulate new types of intermediaries like underwriters, clearing houses, portfolio managers, credit rating agencies, and margin providers.
They also enhance the markets regulator's investigative powers.
Sri Lanka is trying to broaden the capital markets and encourage more investments by the public while cracking down on malpractices that give the trade a bad name.
The IMF also called for the SEC's governance structure to be strengthened to mitigate what it said were concerns about its