Streamlining the stock market affairs
Tuesday, 6 November 2007
COUNTRY'S stock market has been in an upbeat mood for sometime. Notwithstanding the fact that the upsurge in share prices comes in contrast to the developments in other sectors of the economy, the return of the general investors in large numbers to the market is a welcome development if seen in the context of a lacklustre performance of the stock market in recent years. However, the investors might find themselves in big trouble if they fail to apply their judgment and sixth sense in an over-heated market. And the capital market regulator-the Securities and Exchange Commission, SEC, that operates in accordance with a time-worn ordinance is unlikely to be much of help in such a situation.
But the investors would be delighted to know that the government has initiated a move to bring about necessary changes in the old ordinance with the objective of facilitating the entry of more and more companies, enhancing the power and jurisdiction of the SEC and stopping effectively the irregularities on the part of the listed issues. The necessary amendments that are expected to be placed before the council of advisers soon, if approved, would make the SEC ordinance time-befitting. One of the proposed amendments would enable the companies and entities that are not registered with the registrar of joint stock companies to enter the stock market and raise capital. The amendment would also create scopes for the government, semi-government and autonomous organisations, with the approval from the SEC, to issue shares, bonds and other securities to mobilise funds to finance their development projects and reduce dependence on external donors. This could prove very helpful in the construction of large infrastructure projects, including major bridges, highways, underground railway and power plants.
The amendments, according to newspaper reports, have proposed to increase the power of the SEC in the matters of punishing the mischief mongers in the stock market and forcing the sponsors of the errant listed issues to compensate for the losses caused to the investors concerned. Unscrupulous sponsors in most cases can now easily get away with their crimes because of the weaknesses in the SEC ordinances and rules made under it. Under the proposed amendments, the SEC would be empowered to seek bank statements of persons and companies suspected of wrongdoing, including insider trading. Moreover, the SEC would be empowered to stop for a longer period the stock market transactions of the listed issues found involved in price manipulation and other white collar crimes. Besides, the issues facing financial penalty for their offences will be free to seek legal redress only after depositing 25 per cent of the fined money with the SEC, which, again would disburse a part of the sum among the affected investors.
All these are very positive steps that would help streamline the affairs of the capital market, encourage more and more companies and firms to enter the stock market and ensure punishment to wrongdoers. But before finalising the amendments, the officials and other concerned, in addition to meeting the needs of the present days, should look beyond that and try to meet the future market as well as investors' requirements. It has taken long many years to get an ordinance amended to help remove distortions and anomalies in the market. So, it would be prudent to incorporate all the legal requirements into the proposed amendments and help prepare a sound base for the market. The sooner, the better.
But the investors would be delighted to know that the government has initiated a move to bring about necessary changes in the old ordinance with the objective of facilitating the entry of more and more companies, enhancing the power and jurisdiction of the SEC and stopping effectively the irregularities on the part of the listed issues. The necessary amendments that are expected to be placed before the council of advisers soon, if approved, would make the SEC ordinance time-befitting. One of the proposed amendments would enable the companies and entities that are not registered with the registrar of joint stock companies to enter the stock market and raise capital. The amendment would also create scopes for the government, semi-government and autonomous organisations, with the approval from the SEC, to issue shares, bonds and other securities to mobilise funds to finance their development projects and reduce dependence on external donors. This could prove very helpful in the construction of large infrastructure projects, including major bridges, highways, underground railway and power plants.
The amendments, according to newspaper reports, have proposed to increase the power of the SEC in the matters of punishing the mischief mongers in the stock market and forcing the sponsors of the errant listed issues to compensate for the losses caused to the investors concerned. Unscrupulous sponsors in most cases can now easily get away with their crimes because of the weaknesses in the SEC ordinances and rules made under it. Under the proposed amendments, the SEC would be empowered to seek bank statements of persons and companies suspected of wrongdoing, including insider trading. Moreover, the SEC would be empowered to stop for a longer period the stock market transactions of the listed issues found involved in price manipulation and other white collar crimes. Besides, the issues facing financial penalty for their offences will be free to seek legal redress only after depositing 25 per cent of the fined money with the SEC, which, again would disburse a part of the sum among the affected investors.
All these are very positive steps that would help streamline the affairs of the capital market, encourage more and more companies and firms to enter the stock market and ensure punishment to wrongdoers. But before finalising the amendments, the officials and other concerned, in addition to meeting the needs of the present days, should look beyond that and try to meet the future market as well as investors' requirements. It has taken long many years to get an ordinance amended to help remove distortions and anomalies in the market. So, it would be prudent to incorporate all the legal requirements into the proposed amendments and help prepare a sound base for the market. The sooner, the better.