An announcement from the Colombo Stock Brokers Association – Adaderana Biz
Temporary closure of the Colombo Stock Exchange (CSE)
Colombo Stock Brokers Association (CSBA) defends the decision of the Securities and Exchange Commission of Sri Lanka (SEC) to temporarily close the Colombo Stock Exchange (CSE) for 5 working days as a justified measure, in view of the economic crisis in the countries as well as the disruptions faced by merchants in the conduct of day-to-day business activities due to recurring power supply interruptions.
The CSBA stated that “it is the duty of the SEC to protect investors and to take appropriate action in accordance with the provisions set forth in Section 30 of SEC Act No. 19 of 2021 which requires the SEC to close the Exchange in case of emergency. for a period of 5 days in the event of a Natural Disaster or an Economic or Financial Crisis. The inclusion of Section 30 in the new SEC Act is of no use if it is not used at a time when Sri Lanka is going through its worst financial crisis yet.
They further stated that Sri Lankan citizens are facing significant hardships including power supply interruptions, limited access to internet and telecom services, causing major disruptions and inefficiencies in conducting business. daily trading, thereby 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, “historic precedent was set in March 2020, when the SEC called for the CSE to be closed solely because of its failure to maintain and regulate a fair, orderly, efficient and transparent securities market. In this case, the SEC boldly made the decision to shut down the CSE pursuant to Sections 3 and 24 of the SEC Act, which ultimately proved to be the correct decision.
Other international markets also closed at various times to protect their investors during catalytic events. Zimbabwe, for example, closed the Stock Exchange for more than a month from June 26, 2020 to August 3, 2020 due to various measures taken to protect the currency and the resulting impact on the financial sector.
Similarly, the Moscow Stock Exchange was closed from February 25, 2022 to March 24, 2022, after the Russian ruble fell to a historic low following the invasion of Ukraine. Additionally, the Egyptian Stock Exchange was also closed for 55 days from January 28, 2011 due to the Arab Spring revolutions.
According to the CSBA, it is the commission’s duty to mitigate systemic risk on the financial system under 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 the enactment of the provisions of the SEC statute which very clearly set out the circumstances under which the market should be closed. As such, the SEC would have given due consideration to the points highlighted above, as well as the prevailing economic, political, social and financial crisis in Sri Lanka, which does not allow the CSE at all to be a fair, orderly and transparent securities. market. Therefore, the SEC made the right decision to order the temporary shutdown of the Exchange for five business days from April 18, 2022 to April 22, 2022.
COLOMBO STOCK DEALERS ASSOCIATION