* Sri Lanka’s Capital Market Watchdog Fails To Arrest The Grave Situation Faced By Colombo Bourse
By Dinuk Samarasinghe
Sri Lanka’s capital market watchdog – the Securities & Exchange Commission of Sri Lanka (SEC) has failed to arrest the grave situation faced by Sri Lanka’s capital market – Colombo Stock Exchange (CSE) although SEC Chief stated that he will unveil a solution on March 31.
Many analysts and investors alike expressed utter disappointment not over SEC Chairman Tilak Karunaratne’s failure to make public such a solution but over SEC’s apathy and obvious inability to arrest the situation.
Analysts and investors utterly disappointed
In their perception Colombo Stock Exchange had largely collapsed during last 14 months several analysts and investors told The Sunday Leader on grounds of anonymity.
“Both investors and market participants were expecting the market’s All Share Price Index (ASPI) to reach 7,800 or even 8,000 level from about 7,400 levels after market-friendly United National Party (UNP) government came into power on January eighth 2015. This is usual as whenever a UNP government comes into power market sees a huge boom. Best example is when Prime Minister Ranil Wickremesinghe-led United National Front (UNF) government came to power in 2001, market saw one of its golden eras till 2004 when the United People’s Freedom Alliance (UPFA) was elected.”
“Dashing all our hopes with Tilak Karunaratne being appointed as SEC Chairman market started to bottom. Of course there’s no direct correlation between marketing plunge and Karunaratne’s appointment, Colombo Bourse failed to gain any significant growth under his tenure unlike during UNP regime of 2001-4,” lamented an analyst.
According to him, after January 2015 market had been falling at an alarming rate and was now down again to 6000 levels in All Share Price Index.
Form Rs.104.17 billion turnover in 2014 Fourth Quarter with a Daily Annual Average turnover of Rs.1.7 billion by the First Quarter of 2015 total turnover of first 3 months in 2015 was down to Rs.66.26 billion with a Daily Annual Average turnover of Rs.1.18 billion. That is over Rs.500 million drop in Daily Turnover with lots of investors losing interest as they lost money.
“Annual turnover of 2014 was over Rs.340.9 billion and that alone has dropped to Rs.253.25 billion by 2015 December end. Several sectors including plantations and exports are affected these companies haven’t see a rise in their export revenue although rupee devaluation has cushioned to some extent.”
Investors had lost over 30% in their portfolio values and most of the investors had been warned by the stock brokers to ‘not to trade’ on margin.
Some analysts and owners of stock brokering firms are of the view that rising interest rates have made the market unattractive and Sri Lanka will no more be a low-interest regime.
Foreigners are not much interested because of the uncertainty in the direction of the Colombo, he added.
Almost all companies in their annual reviews in the annual reports for last year have been highlighting about the instability of Bourse and loss of investor confidence.
Customs racket
Last year several websites alleged that Investigation Officials of Sri Lanka Customs have unearthed that Multiform Chemicals (Pvt) Ltd owned by Tilak Karunaratne, has been violating the country’s customs laws.
“Once an aggressive supporter of President Mahinda Rajapaksa, Tilak Karunaratne became a vociferous critic as he was not appointed the organiser for Bandaragama. Although he was the Chairman of SEC then, he resigned saying that he has been intimidated by ‘the powers that be’ to step down. At the time he deviously fabricated a story to the Media saying that it was the ‘Stock Market Mafia’ which influenced President Rajapaksa to remove him,” Lanka News Web reported on Novemeber 18, 2015.
“This shocking revelation clearly exposes Tilak Karunaratne’s company Multiform Chemicals, which has been the agent of a French company called Roquette for 15 years, which manufactures plant based raw materials. Multiform has been through years, importing food grade corn starch from the said company and supplying the same to reputed companies like Hemas, Unilever, State Pharmaceuticals etc. as a food and pharmaceutical raw material. However, in paying duty for the importation, Tilak Karunaratne and his company have knowingly and fraudulently continued to declare that he was importing these shipments on the basis of an industrial grade corn starch, which he was supplying to certain textile companies in the country for yarn sizing.”
“It is very important to note the difference in duty between food grade corn starch and industrial grade corn starch, which is 25% and 10% respectively. This manipulation of HS codes is a gross violation of the country’s customs duty regulations and amounts to defrauding the Government of Sri Lanka of revenue. Considering the longevity and frequency of Tilak Karunaratne’s shipments, a fraud amounting to approx. Rs.450 Million has been established by Customs officials.”
“The real reason why Dhammika Perera, Head of Investigations of SEC has been suddenly sent on compulsory leave by Tilak Karunaratne (as reported in the Sunday Times of 15th November), is directly related to this expose, sources at SEC divulge. An anonymous letter exposing details of Tilak Karunaratne’s duplicity and fraudulent ways have reached SEC senior officials and it is said that Dhammika Perera was very interested in investigating the veracity of the accusations. So in a bid to prevent an investigation on his personal integrity and the consideration of his suitability to continue to head one of the main financial institutions of the country, Tilak Karunaratne has removed Dhammike Perera, in a desperate attempt to derail the upcoming investigations.”
However when asked about the Rs 450 million customs racket by a Sinhala language media, Karunaratne said that they should ask the Sri Lanka Customs about the allegations.
Karunaratne’s French connection
Karunaratne’s business partner firm which exports to Chemicals (Pvt) Ltd – Roquette America, Inc. is said to be the regional operating subsidiary of Roquette Freres, a multinational corporation, which is headquartered in Lestrem, France.
According to Environmental Protection Agency of United States, Roquette Freres, a privately held family company, employs over 6,000 people internationally with locations, including 18 factories, across Europe, the United States and Asia.
Roquette Freres is a leading producer of starch products, sugar alcohols, and syrups derived from corn, wheat, potatoes, and peas. The process produces over 650 by-products including bioethanol, sugars, dietary fibers, sugar alcohol, and chemical products. These byproducts are in turn used as ingredients in a wide range of products ranging from nutrition bars and frozen desserts to pharmaceutical and bio-chemical products. Roquette processes over 6 million tons of wheat, corn, peas, and potatoes annually. RAI owns and operates a wet corn milling plant, which includes a wastewater treatment plant, in Keokuk, Iowa.
In Roquette America, Inc. Settlement announced on Nov. 13, 2012, Roquette America, Inc. agreed to pay a US$ 4,100,000 civil penalty to settle alleged violations of the Clean Water Act and its National Pollutant Discharge Elimination System (NPDES) permit at its grain processing facility in Keokuk, Iowa, the Environmental Protection Agency and the U.S. Department of Justice announced.
SEC's tug-of-war
It is believed that Karunaratna is a member of a committee known as the Anti-Corruption Secretariat, appointed by the Cabinet or Prime Minister’s Office to look in to and advice on matters handled by FCID.
Last year, Former SEC Chairman Dr. Nalaka Godahewa was arrested along with SEC Director/Board Member Ronnie Ibrahim over an alleged financial fraud whilst the SEC’s suspended Deputy Director General Dhammika Manjira Perera was arrested on December four, by the Financial Crime Investigating Division (FCID) in connection with a donation of Rs. five million towards – Tharunyata Hetak, the one-time de-facto youth wing led and run by Hambantota District parliamentarian Namal Rajapaksa – son of former President Mahinda Rajapaksa. The Sunday Leader reported last year that these developments were due to an ongoing tug-of-war and difference of opinion between the SEC’s sitting Chairman Tilak Karunarathne, who himself was forced to resign allegedly under pressure by the former President Mahinda Rajapaksa for difference of opinion. (SEe http://www.thesundayleader.lk/2015/12/13/sec-controversy-heats-up/)
The Sunday Leader is in possession of documents which point that difference of opinion between the SECs two heads may have led to sitting Chairman Tilak Karunaratna to seek intervention from law enforcement authorities against the arrested trio.
The Director Sports of Tharunyayata Hetak by letter dated August six, 2013, addressed to the then Chairman of the SEC, requested a sponsorship a Rs. 5 million to defray the cost of workshops/programmes undertaken by it with the view to empowering youth in rural areas. The applicant had stated that a capital market awareness component too was included in the said workshops/programmes.
Upon receiving the said letter, Dr. Nalaka Godahewa, the then Chairman of SEC had directed Dhammika Perera to look in to the viability of granting the said sponsorship in his then capacity as the Deputy Director General/ Officer in Charge.
Thereafter, Perera and Thushara Jayaratne Director, External Relations and Market Development of the SEC, who was then in charge of public awareness, had assessed the said request and after having discussed the matter with the then Chairman of SEC and obtained his concurrence. Perera along with Jayaratne also submitted a Board Paper recommending the proposal made by Tharunyata Hetak but limiting the sponsorship only to Rs. 3 million although Rs. 5 million had been sought stating that the said recommendation was well within the approved budget for the year 2013.
On August 10, 2015 the Financial Crimes Investigations Division (FCID) in a B report filed made Perera a suspect (with a travel ban) for alleged criminal misappropriation of funds granted to Tharunyata Hetak.
Sent on leave
Thereafter SEC by its letter dated November 11, 2015 (reference SEC/DG/15/10/110) signed by the Director General of the SEC sent to Dhammika Perera by post placed the DDG on compulsory leave.
It was alleged in the letter that Perera in his capacity as the former Director Investigations and subsequently overseen by him in his capacity as Deputy Director General/ Officer in Charge has ‘failed to investigate the market malpractices (including market manipulation and insider dealing) highlighted by Surveillance Referrals, and that he has ‘failed to exercise due care and diligence in carrying out duties’ and ‘not discharging duties to achieve the core objects of SEC’.
SEC sources claimed that there was absolute possibility where Perera can be singled out in respect of the conduct of any investigation by the SEC. Perera claims that the above allegations have been made against him without giving him a single opportunity of being heard violating the rules of natural justice ostensibly based on a report by a panel of Attorneys-at-Law and adds that he vehemently denies the (report in its) entirety of such unjust, unsubstantiated allegations levelled against him in the aforementioned letter due non-compliance with the following procedure:-
Alleged impropriety
In terms of the established, documented, approved procedure which is published on the SEC Website as well as long implemented practice, no single person at the Secretariat or the Commission of the Securities and Exchange Commission (SEC) either commence, conduct, terminate an investigation and/or decide on any enforcement action in respect of such an investigation as the case was always in the history.
It is common knowledge that when a surveillance referral is raised on a suspected irregularity, it should be first referred to the Surveillance Committee which comprises several senior members of the SEC Secretariat as approved by the Commission. (i.e. up to November 2012 Director General, Director Legal, Director Capital Market Development, Director Corporate Affairs & a rotating member and from November 2012 Director General, Deputy Director General, Director Supervision and Director Surveillance were on the committee)
The said Surveillance Committee is responsible as a collective body to determine as to whether a fully-fledged investigation in to the subject matter is warranted or any other action is required.
If the Surveillance Committee decides to proceed with a full investigation, then the matter is referred to the Commission for a determination. If the Commission too approves a full investigation, then the matter is referred to the Investigation Division for commencement of an investigation.
Under usual protocol, an Investigation Officer below the rank of the Director is assigned to carry out the investigation with the assistance of any other officer/s in the Division if required and under the supervision of the Director. The investigations are conducted in accordance with a Commission approved Investigation Manual which depicts the procedure in detail.
During the course of an investigation, the Commission is kept informed of the progress of the same at the Commission meetings by way of the Divisional Report of the Investigations Division.
On completion of the investigation, a detailed investigation report is prepared by the respective investigation officer setting out the findings and evidence elicited during the investigation together with the recommendations and is submitted the same to the Investigations Committee for consideration and an appropriate determination.
The Investigations Committee is vested with the responsibility to peruse the findings and the recommendations in the investigations report and make a determination as to whether or not the Committee agrees with such findings/recommendations.
The Investigations Committee would advise the Investigations Division to conduct further investigations or improve the report if deemed necessary or refer the investigations report to the Commission for an appropriate decision if the Investigation Committee is in agreement with findings/recommendations contained in the final report.
The final decision on the investigation is then made by the Commission as to whether any enforcement action should be contemplated or such investigation to be terminated. The Commission may at this stage even direct the SEC Secretariat to conduct further investigations or any other course of action as deemed necessary.
Perera claims that it is manifestly clear that vague, unsubstantiated allegations leveled against him are baseless and can be sustained as neither he nor any other officer/member of the SEC Secretariat or the Commission can be singled out in respect of the investigations conducted by the SEC.
Allegations of harassment
Sources close to Perera cited the following as malicious treatment and harassment against the DDG.
As a long standing, well experienced professional with technical know-how, the DDG had to not only advise the SEC Chairman (i.e Karunaratna) on certain regulatory concerns but also sometimes argue and disagree with him on some issues of importance in the best interests of the industry and the institution, which ‘seemingly annoyed him’ as he was reportedly on a strict pre-conceived notion and an agenda of his own regarding the marketplace and certain investors.
In this backdrop, Karunaratna used to ridicule the DDG (i.e. Perera) at meetings where senior officials of SEC Secretariat were present particularly at the Investigations Committee meetings wherein Perera explained the evidence elicited during the course of some ongoing Investigations as well as the mitigatory factors and possible defenses, if any, which could be taken up by the parties who were under investigations.
“This was done as a part of my duty as the then Director Investigations and also as an experienced as well as an impartial investigator who had gathered at least 16 years of direct service pre dominantly in the area of investigations in relation to the securities market,” he claims.
“Even though the above was done in good faith and in line with the duties and responsibilities cast upon me in my official capacity, it appeared to me that Karunaratna was on a different personal agenda which is not in line with the advice/opinion expressed by the professionals who were involved in the subject area.”
Perera added that this was nothing but personal vendetta against him and claims that a few days prior to issuing of the letter imposing compulsory leave (dated November 11, 2015), Karunaratna sent a message to him through Mrs. Ayanthi Abeywickrama, Director Legal of the SEC, to the effect that the ‘harassment’ caused to him would halt if he tendered his resignation and step down from his position at the SEC. Moreover, on November 11, 2015, the SEC had reportedly made a similar intimation that no action will be instituted against Perera if his resignation letter is handed over.
By Dinuk Samarasinghe
Sri Lanka’s capital market watchdog – the Securities & Exchange Commission of Sri Lanka (SEC) has failed to arrest the grave situation faced by Sri Lanka’s capital market – Colombo Stock Exchange (CSE) although SEC Chief stated that he will unveil a solution on March 31.
Many analysts and investors alike expressed utter disappointment not over SEC Chairman Tilak Karunaratne’s failure to make public such a solution but over SEC’s apathy and obvious inability to arrest the situation.
Analysts and investors utterly disappointed
In their perception Colombo Stock Exchange had largely collapsed during last 14 months several analysts and investors told The Sunday Leader on grounds of anonymity.
“Both investors and market participants were expecting the market’s All Share Price Index (ASPI) to reach 7,800 or even 8,000 level from about 7,400 levels after market-friendly United National Party (UNP) government came into power on January eighth 2015. This is usual as whenever a UNP government comes into power market sees a huge boom. Best example is when Prime Minister Ranil Wickremesinghe-led United National Front (UNF) government came to power in 2001, market saw one of its golden eras till 2004 when the United People’s Freedom Alliance (UPFA) was elected.”
“Dashing all our hopes with Tilak Karunaratne being appointed as SEC Chairman market started to bottom. Of course there’s no direct correlation between marketing plunge and Karunaratne’s appointment, Colombo Bourse failed to gain any significant growth under his tenure unlike during UNP regime of 2001-4,” lamented an analyst.
According to him, after January 2015 market had been falling at an alarming rate and was now down again to 6000 levels in All Share Price Index.
Form Rs.104.17 billion turnover in 2014 Fourth Quarter with a Daily Annual Average turnover of Rs.1.7 billion by the First Quarter of 2015 total turnover of first 3 months in 2015 was down to Rs.66.26 billion with a Daily Annual Average turnover of Rs.1.18 billion. That is over Rs.500 million drop in Daily Turnover with lots of investors losing interest as they lost money.
“Annual turnover of 2014 was over Rs.340.9 billion and that alone has dropped to Rs.253.25 billion by 2015 December end. Several sectors including plantations and exports are affected these companies haven’t see a rise in their export revenue although rupee devaluation has cushioned to some extent.”
Investors had lost over 30% in their portfolio values and most of the investors had been warned by the stock brokers to ‘not to trade’ on margin.
Some analysts and owners of stock brokering firms are of the view that rising interest rates have made the market unattractive and Sri Lanka will no more be a low-interest regime.
Foreigners are not much interested because of the uncertainty in the direction of the Colombo, he added.
Almost all companies in their annual reviews in the annual reports for last year have been highlighting about the instability of Bourse and loss of investor confidence.
Customs racket
Last year several websites alleged that Investigation Officials of Sri Lanka Customs have unearthed that Multiform Chemicals (Pvt) Ltd owned by Tilak Karunaratne, has been violating the country’s customs laws.
“Once an aggressive supporter of President Mahinda Rajapaksa, Tilak Karunaratne became a vociferous critic as he was not appointed the organiser for Bandaragama. Although he was the Chairman of SEC then, he resigned saying that he has been intimidated by ‘the powers that be’ to step down. At the time he deviously fabricated a story to the Media saying that it was the ‘Stock Market Mafia’ which influenced President Rajapaksa to remove him,” Lanka News Web reported on Novemeber 18, 2015.
“This shocking revelation clearly exposes Tilak Karunaratne’s company Multiform Chemicals, which has been the agent of a French company called Roquette for 15 years, which manufactures plant based raw materials. Multiform has been through years, importing food grade corn starch from the said company and supplying the same to reputed companies like Hemas, Unilever, State Pharmaceuticals etc. as a food and pharmaceutical raw material. However, in paying duty for the importation, Tilak Karunaratne and his company have knowingly and fraudulently continued to declare that he was importing these shipments on the basis of an industrial grade corn starch, which he was supplying to certain textile companies in the country for yarn sizing.”
“It is very important to note the difference in duty between food grade corn starch and industrial grade corn starch, which is 25% and 10% respectively. This manipulation of HS codes is a gross violation of the country’s customs duty regulations and amounts to defrauding the Government of Sri Lanka of revenue. Considering the longevity and frequency of Tilak Karunaratne’s shipments, a fraud amounting to approx. Rs.450 Million has been established by Customs officials.”
“The real reason why Dhammika Perera, Head of Investigations of SEC has been suddenly sent on compulsory leave by Tilak Karunaratne (as reported in the Sunday Times of 15th November), is directly related to this expose, sources at SEC divulge. An anonymous letter exposing details of Tilak Karunaratne’s duplicity and fraudulent ways have reached SEC senior officials and it is said that Dhammika Perera was very interested in investigating the veracity of the accusations. So in a bid to prevent an investigation on his personal integrity and the consideration of his suitability to continue to head one of the main financial institutions of the country, Tilak Karunaratne has removed Dhammike Perera, in a desperate attempt to derail the upcoming investigations.”
However when asked about the Rs 450 million customs racket by a Sinhala language media, Karunaratne said that they should ask the Sri Lanka Customs about the allegations.
Karunaratne’s French connection
Karunaratne’s business partner firm which exports to Chemicals (Pvt) Ltd – Roquette America, Inc. is said to be the regional operating subsidiary of Roquette Freres, a multinational corporation, which is headquartered in Lestrem, France.
According to Environmental Protection Agency of United States, Roquette Freres, a privately held family company, employs over 6,000 people internationally with locations, including 18 factories, across Europe, the United States and Asia.
Roquette Freres is a leading producer of starch products, sugar alcohols, and syrups derived from corn, wheat, potatoes, and peas. The process produces over 650 by-products including bioethanol, sugars, dietary fibers, sugar alcohol, and chemical products. These byproducts are in turn used as ingredients in a wide range of products ranging from nutrition bars and frozen desserts to pharmaceutical and bio-chemical products. Roquette processes over 6 million tons of wheat, corn, peas, and potatoes annually. RAI owns and operates a wet corn milling plant, which includes a wastewater treatment plant, in Keokuk, Iowa.
In Roquette America, Inc. Settlement announced on Nov. 13, 2012, Roquette America, Inc. agreed to pay a US$ 4,100,000 civil penalty to settle alleged violations of the Clean Water Act and its National Pollutant Discharge Elimination System (NPDES) permit at its grain processing facility in Keokuk, Iowa, the Environmental Protection Agency and the U.S. Department of Justice announced.
SEC's tug-of-war
It is believed that Karunaratna is a member of a committee known as the Anti-Corruption Secretariat, appointed by the Cabinet or Prime Minister’s Office to look in to and advice on matters handled by FCID.
Last year, Former SEC Chairman Dr. Nalaka Godahewa was arrested along with SEC Director/Board Member Ronnie Ibrahim over an alleged financial fraud whilst the SEC’s suspended Deputy Director General Dhammika Manjira Perera was arrested on December four, by the Financial Crime Investigating Division (FCID) in connection with a donation of Rs. five million towards – Tharunyata Hetak, the one-time de-facto youth wing led and run by Hambantota District parliamentarian Namal Rajapaksa – son of former President Mahinda Rajapaksa. The Sunday Leader reported last year that these developments were due to an ongoing tug-of-war and difference of opinion between the SEC’s sitting Chairman Tilak Karunarathne, who himself was forced to resign allegedly under pressure by the former President Mahinda Rajapaksa for difference of opinion. (SEe http://www.thesundayleader.lk/2015/12/13/sec-controversy-heats-up/)
The Sunday Leader is in possession of documents which point that difference of opinion between the SECs two heads may have led to sitting Chairman Tilak Karunaratna to seek intervention from law enforcement authorities against the arrested trio.
The Director Sports of Tharunyayata Hetak by letter dated August six, 2013, addressed to the then Chairman of the SEC, requested a sponsorship a Rs. 5 million to defray the cost of workshops/programmes undertaken by it with the view to empowering youth in rural areas. The applicant had stated that a capital market awareness component too was included in the said workshops/programmes.
Upon receiving the said letter, Dr. Nalaka Godahewa, the then Chairman of SEC had directed Dhammika Perera to look in to the viability of granting the said sponsorship in his then capacity as the Deputy Director General/ Officer in Charge.
Thereafter, Perera and Thushara Jayaratne Director, External Relations and Market Development of the SEC, who was then in charge of public awareness, had assessed the said request and after having discussed the matter with the then Chairman of SEC and obtained his concurrence. Perera along with Jayaratne also submitted a Board Paper recommending the proposal made by Tharunyata Hetak but limiting the sponsorship only to Rs. 3 million although Rs. 5 million had been sought stating that the said recommendation was well within the approved budget for the year 2013.
On August 10, 2015 the Financial Crimes Investigations Division (FCID) in a B report filed made Perera a suspect (with a travel ban) for alleged criminal misappropriation of funds granted to Tharunyata Hetak.
Sent on leave
Thereafter SEC by its letter dated November 11, 2015 (reference SEC/DG/15/10/110) signed by the Director General of the SEC sent to Dhammika Perera by post placed the DDG on compulsory leave.
It was alleged in the letter that Perera in his capacity as the former Director Investigations and subsequently overseen by him in his capacity as Deputy Director General/ Officer in Charge has ‘failed to investigate the market malpractices (including market manipulation and insider dealing) highlighted by Surveillance Referrals, and that he has ‘failed to exercise due care and diligence in carrying out duties’ and ‘not discharging duties to achieve the core objects of SEC’.
SEC sources claimed that there was absolute possibility where Perera can be singled out in respect of the conduct of any investigation by the SEC. Perera claims that the above allegations have been made against him without giving him a single opportunity of being heard violating the rules of natural justice ostensibly based on a report by a panel of Attorneys-at-Law and adds that he vehemently denies the (report in its) entirety of such unjust, unsubstantiated allegations levelled against him in the aforementioned letter due non-compliance with the following procedure:-
Alleged impropriety
In terms of the established, documented, approved procedure which is published on the SEC Website as well as long implemented practice, no single person at the Secretariat or the Commission of the Securities and Exchange Commission (SEC) either commence, conduct, terminate an investigation and/or decide on any enforcement action in respect of such an investigation as the case was always in the history.
It is common knowledge that when a surveillance referral is raised on a suspected irregularity, it should be first referred to the Surveillance Committee which comprises several senior members of the SEC Secretariat as approved by the Commission. (i.e. up to November 2012 Director General, Director Legal, Director Capital Market Development, Director Corporate Affairs & a rotating member and from November 2012 Director General, Deputy Director General, Director Supervision and Director Surveillance were on the committee)
The said Surveillance Committee is responsible as a collective body to determine as to whether a fully-fledged investigation in to the subject matter is warranted or any other action is required.
If the Surveillance Committee decides to proceed with a full investigation, then the matter is referred to the Commission for a determination. If the Commission too approves a full investigation, then the matter is referred to the Investigation Division for commencement of an investigation.
Under usual protocol, an Investigation Officer below the rank of the Director is assigned to carry out the investigation with the assistance of any other officer/s in the Division if required and under the supervision of the Director. The investigations are conducted in accordance with a Commission approved Investigation Manual which depicts the procedure in detail.
During the course of an investigation, the Commission is kept informed of the progress of the same at the Commission meetings by way of the Divisional Report of the Investigations Division.
On completion of the investigation, a detailed investigation report is prepared by the respective investigation officer setting out the findings and evidence elicited during the investigation together with the recommendations and is submitted the same to the Investigations Committee for consideration and an appropriate determination.
The Investigations Committee is vested with the responsibility to peruse the findings and the recommendations in the investigations report and make a determination as to whether or not the Committee agrees with such findings/recommendations.
The Investigations Committee would advise the Investigations Division to conduct further investigations or improve the report if deemed necessary or refer the investigations report to the Commission for an appropriate decision if the Investigation Committee is in agreement with findings/recommendations contained in the final report.
The final decision on the investigation is then made by the Commission as to whether any enforcement action should be contemplated or such investigation to be terminated. The Commission may at this stage even direct the SEC Secretariat to conduct further investigations or any other course of action as deemed necessary.
Perera claims that it is manifestly clear that vague, unsubstantiated allegations leveled against him are baseless and can be sustained as neither he nor any other officer/member of the SEC Secretariat or the Commission can be singled out in respect of the investigations conducted by the SEC.
Allegations of harassment
Sources close to Perera cited the following as malicious treatment and harassment against the DDG.
As a long standing, well experienced professional with technical know-how, the DDG had to not only advise the SEC Chairman (i.e Karunaratna) on certain regulatory concerns but also sometimes argue and disagree with him on some issues of importance in the best interests of the industry and the institution, which ‘seemingly annoyed him’ as he was reportedly on a strict pre-conceived notion and an agenda of his own regarding the marketplace and certain investors.
In this backdrop, Karunaratna used to ridicule the DDG (i.e. Perera) at meetings where senior officials of SEC Secretariat were present particularly at the Investigations Committee meetings wherein Perera explained the evidence elicited during the course of some ongoing Investigations as well as the mitigatory factors and possible defenses, if any, which could be taken up by the parties who were under investigations.
“This was done as a part of my duty as the then Director Investigations and also as an experienced as well as an impartial investigator who had gathered at least 16 years of direct service pre dominantly in the area of investigations in relation to the securities market,” he claims.
“Even though the above was done in good faith and in line with the duties and responsibilities cast upon me in my official capacity, it appeared to me that Karunaratna was on a different personal agenda which is not in line with the advice/opinion expressed by the professionals who were involved in the subject area.”
Perera added that this was nothing but personal vendetta against him and claims that a few days prior to issuing of the letter imposing compulsory leave (dated November 11, 2015), Karunaratna sent a message to him through Mrs. Ayanthi Abeywickrama, Director Legal of the SEC, to the effect that the ‘harassment’ caused to him would halt if he tendered his resignation and step down from his position at the SEC. Moreover, on November 11, 2015, the SEC had reportedly made a similar intimation that no action will be instituted against Perera if his resignation letter is handed over.
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