Colombo Stock Brokers Association (CSBA) defends the decision by the Securities and Exchange Commission of Sri Lanka (SEC) to temporarily close down the Colombo Stock Exchange (CSE) for 5 business days as a warranted measure, considering the prevailing economic crisis in the country as well as the disruptions faced by traders in conducting day to day trading activities owing to the recurrent power supply disruptions.
The CSBA stated that “It is the duty of the SEC to protect the investors and take appropriate action as per the provisions made available within section 30 of the SEC Act No.19 of 2021 that requires the SEC to close the Exchange during an emergency for a period of 5 days in the event of a Natural disaster or Economic or Financial crisis. The inclusion of Section 30 in the new SEC Act, serves no purpose if it isn’t used at a time when Sri Lanka is going through its worse financial crisis to date.”
They further stated that Sri Lankan citizens are facing significant hardships including disruptions to power supply, limited access to internet and telecommunication services, causing major disruptions and inefficiencies in conducting day to day trading activities, therefore also meeting the requirements of Section 3 of SEC Act No.19 of 2021, where the market cannot operate in a free, orderly and efficient manner.
According to the CSBA, “Historical precedence was set in March 2020, when the SEC requested the CSE to be closed only due to the lack of its ability to maintain and regulate a fair, orderly, efficient and transparent securities market. In that instance, the SEC boldly took the decision to close the CSE according to sections 3 & 24 of the SEC Act, which eventually proved to be a correct decision.”
According to the CSBA, it is the duty of the commission to mitigate systemic risk in the Financial System in terms of Chapter 3 of the SEC act. Therefore, they stated that the SEC’s decision to close the market is not based on lobbying, but on enacting the provisions of the SEC Act which has very clearly stated the circumstances under which the market should be closed.
"As such, the SEC would have taken due consideration the points highlighted above, and the prevailing Economic, Political, Social, and Financial Crisis in Sri Lanka which does not make it at all possible for the CSE to be a fair, orderly, and transparent securities market," the association said.
"Therefore, the SEC has taken the correct decision to direct the temporary closure of the Exchange for five business days from 18 April 2022 to 22 April 2022."