Brokers plan to seek political assistance

By Ishara Gamage

The members of the Colombo Stock Exchange (CSE) rallied against the proposed shareholding structure of the recently gazetted CSE Demutualization Bill and said they will lobby through their political lobby groups, during the Bill debating sessions.
“The proposed shareholding structure of the demutualized exchange is clearly an expropriation of our private sector rights, the Government didn’t consider our previous suggestions, Therefore, we were planning to reconvict the Government through our political lobby groups, during the upcoming Bill debating sessions”, the members told Ceylon FT.

The Demutualization Bill has suggested a 60:40 shareholding ratio between CSE full-member stockbroker firms and the newly creating Government-owned capital market development fund.

The purposes of the fund are development of capital market of Sri Lanka; the promotion of investor education; the improvement of capital market infrastructure and the improvement of investor access and participation in the capital market.
The 15-member CSE-owned full-member stockbroker firms have therefore opposed this proposed shareholding structure and earlier urged the Government to revise it to at least 70:30 levels.

“It is unethical that the Government has suggested taking a relatively large stake of the proposed demutualized exchange. They said this new fund was only for capital market development, but we can categorically say that the Government has rarely utilized even current Cess-Fund money for capital market development instead of forceful budget deficit financing”, they said.
Currently, the CSE operates as a self-regulatory organization formed as a mutually-owned company, limited by guarantee and owned by 15-member firms.

“The main objective of this Bill is to demutualize the Colombo Stock Exchange which is a Company limited by guarantee and licensed as a stock exchange under the Securities and Exchange Commission of Sri Lanka Act, No. 36 of 1987 by conversion in terms of the provisions of this Act to a Company limited by shares”, the Bill stated.
According to the Bill the members may decide on the allocation of the 60% of the shares to be issued of the Demutualized Stock Exchange among the members subject to a maximum ceiling of 5% for each individual member in respect of the shares to be issued to such member.

The members of the Board of Directors of the Demutualized Stock Exchange will be limited to seven which include minimum four independent directors and three persons representing stock brokers.
The appointments of the Board of Directors of the Demutualized Stock Exchange will be done through the 5 member nomination panel headed by the Governor of the Central Bank of Sri Lanka.

The Chairman of the Board of Directors of the Demutualized Stock Exchange will be elected by the Board of Directors from among the Independent Directors.

The Board of Directors of the Demutualized Stock Exchange will take necessary action to list the Demutualized Stock Exchange on its own exchange with the approval of the Commission within a period of three years from the date of conversion.

The Demutualization Bill has suggested a 60:40 shareholding ratio between CSE full-member stockbroker firms and the newly creating Government-owned capital market development fund.

The purposes of the fund are development of Capital Market of Sri Lanka; the promotion of investor education; the improvement of capital market infrastructure and the improvement of investor access and participation in the capital market.
The 15-member CSE-owned full-member stockbroker firms have therefore opposed this proposed shareholding structure and earlier urged the Government to revise it to at least 70:30 levels.

“It is unethical that the Government has suggested taking a relatively large stake of the proposed demutualized exchange. They said this new fund was only for Capital Market development, but we can categorically say that the Government has rarely utilized even current Cess-Fund money for capital market development instead of forceful budget deficit financing”, they said.
Currently, the CSE operates as a self-regulatory organization formed as a mutually-owned company, limited by guarantee and owned by 15-member firms.

“The main objective of this Bill is to demutualize the Colombo Stock Exchange which is a Company limited by guarantee and licensed as a stock exchange under the Securities and Exchange Commission of Sri Lanka Act, No. 36 of 1987 by conversion in terms of the provisions of this Act to a Company limited by shares”, the Bill stated.

According to the Bill, the members may decide on the allocation of the 60% of the shares to be issued of the Demutualized Stock Exchange among the members subject to a maximum ceiling of 5% for each individual member in respect of the shares to be issued to such member.

The members of the Board of Directors of the Demutualized Stock Exchange will be limited to seven which include minimum four independent directors and three persons representing stock brokers.
The appointments of the Board of Directors of the Demutualized Stock Exchange will be done through the 5 member nomination panel headed by the Governor of the Central Bank of Sri Lanka.
The Chairman of the Board of Directors of the Demutualized Stock Exchange will be elected by the Board of Directors from among the Independent Directors.

The Board of Directors of the Demutualized Stock Exchange will take necessary action to list the Demutualized Stock Exchange on its own exchange with the approval of the Commission within a period of three years from the date of conversion.