ECONOMYNEXT – Sri Lanka’s stock market intermediaries should have a board-approved policy to comply with the Securities and Exchange Act and a full-time compliance officer to implement it, SEC Chairman Faizal Salieh has said.
The compliance function should be independent of the business operations of the market intermediary and compliance officer should report matters directly to the board of directors, or a board sub-committee dealing with risk such as the audit or risk committee.
SEC mandates that compliance officers must hold full-time positions due to the substantial responsibilities associated with their role, Salieh was quoted as saying at a recent meeting with compliance officers.
Compliance officers must provide a sworn affidavit declaring their adherence to the fit and proper criteria established by the SEC.
SEC rules mandate the creation of an internal compliance manual for directors and employees, incorporating the specific content outlined in the relevant schedule.
The compliance manual should cover conflicts of interest, corporate governance, and risk management to raise market standards, and make the market more attractive to investors.
Before developing this manual, market intermediaries should have a board-approved compliance policy to guide the compliance officer in implementing the compliance process.
Compliance officers should provide prior written approval for all personal account trade transactions of other employees, in order that these transactions do not harm other clients’ interests.
The appointment of a compliance officer is a prerequisite for granting or renewing licenses to market intermediaries and to comply with SEC requirements.
If a compliance officer resigns, the market intermediary must inform the SEC, and select a successor with prior SEC approval.
The SEC will investigate the reasons behind a resignation, particularly focusing on any internal interferences or influences within the compliance function.
There should be an effective complaint handling mechanism at the market intermediary level, Salieh said referring to complaints received by the SEC. (Colombo/Oct6/2023)
more than ever, when an infringement or manipulation or unethical practice is detected and is seen, immediate action or penalties should be imposed, and not any shoddy work or delayed measures.