Kurunegala leads the way in the fight for small investors

By Quintus Perera
Regional stock market group says they have been deceived by the authorities
View(s):
Enough is enough. That is the decision taken by the Kurunegala Small Investors’ Association Sri Lanka (KSIA) during a consultation in Colombo on Thursday on protecting minority small shareholders in the stock market with K.C. Vignarajah, a staunch defender of retail investors and a good governance activist.

KSIA was formed around four years ago with about 50 members as these small scale investors found that they have been allegedly deceived by the regulator in being lured to invest in the stock market. From the point of their investing in the market they have not only received any returns, but as things stand now they have lost their money, too.

Pradeep Senaratne, President, KSIA told the BusinessTimes (BT), who with his colleagues travelled to Colombo to highlight their situation, said the KSIA has been agitating persistently to get adequate returns on their investments and now they have found they have completely been duped, and “had they known the stock market is such a dirty untrustworthy place’, they would never have invested in stocks.

He said four years is a long time in the case of investments and if they don’t find an urgent solution they are prepared to take the strongest action, such as surround the SEC Office and launch a Sathyagraha (fast unto death) as they have been fed with ‘fairy tales’ by these officials and the media in promotional campaigns, and now could not feed their children due to lost investments.

Their concerns came just as the SEC announced the possibility of forming a Minority Investors’ Association for stock market investors. The SEC in a public notice called for public representations and also from former Executive Directors/Chairmen of listed entities for their ideas on the proposed association.

Mr. Senaratne said that they have endorsed the call by Mr. Vignarajah and recently by Wijeya Gunawardena, President, CIFL Depositors Association, that there should be a safety net to safeguard the investments in any financial institution or in the stock market. If this vitally important safety net (by way of an insurance scheme) is not provided, they would call on all the prospective investors not to invest in any financial institution or the stock market.

He said that they have already taken necessary initiatives to motivate and mobilise the setting up of retail investors’ association branches across the country.

He is of the view that they would not be able to fight the ‘giant’ SEC and force the government to take necessary steps to put the whole thing into a stable and trustworthy process, without a concerted and strong force.

They have also written to the President and plan to complain to the Human Rights Commission.

Mr. Senaratne said that the notices and other documents issued by the SEC are in English and the KSIA is alerting the Ministry of National Languages and Social Integration to issue instructions to the SEC to issue all these material in Sinhala and Tamil too.

The KSIA President pointed out that after going through the financial statements of companies only they decide to invest, but in some cases they have found that those financial statements give wrong information. He said that some of the examples are CIFL, Touchwood and PC House.

The KSIA further pointed out that another institution that is responsible for financial mishaps and failures of corporate entities is the Institution of Chartered Accountants of Sri Lanka (CA) and indicated that there could be flaws in reporting by accountants and auditors and the responsibility of the Accountants and Auditors have been questioned for the collapse of Golden Key, Pramuka Bank, the collapse of Ceylinco Group and CIFL.

The BT asked Mr. Vignarajah as to what happened to the proposed Small Share Holders Association that was planned to be formed in Colombo. He said that the mafia in the stock market is still active but noted that the proposed association and its formation is still in the pipeline and would be revived with more vigour and also ward off any (possible) mafia influence or infiltration. They would also like to join hands with other like-minded institutions, like the KSIA.

The KSIA is also exploring the possibility of joining hands with other similar organizations as stronger their power, better are the prospects of fighting for their rights. In this sphere, they have already initiated talks with the CIFL Depositors Association.

Mr. Senaratne urged other small investors to contact them, if any individual or group of small investors to form branches etc. His telephone number is 0773123403

http://www.sundaytimes.lk/

Minority Investors’ association
View(s):
On Thursday, a group of investors in Colombo’s stock market, residing in Kurunegala met at the residence of K.C. Vignarajah, good governance advocate and fighter for the rights of small investors in the market.

Their grouse: No one – the authorities (SEC/CSE or stock brokers included) – is listening to their plea for adequate returns from their investments. They seemed to have lost hope in the market and now are determined to take the once-sombre fight to a different level.

These investors from Kurunegala have formed into an association and say they have raised these issues about falling values of their stock, etc and blamed the authorities for ‘attractive’ promotional campaigns that have drawn them into investing but now with no return in sight.

They say they have been knocking on the doors of the SEC – through individual calls, personal appearances at the office, and letters – to complain about these issues but have not got any satisfactory response. They have also written to President Mahinda Rajapaksa but the follow-up from the President’s office has been lukewarm.

Their plea ironically comes at a time when the SEC is initiating the formation of a Minority Investors’ Association. In a newspaper advertisement cum notice posted on the SEC website, the SEC invited views from the public, saying “You are invited to comment on the following aspects of the proposal during which it is expected to obtain all concerned stakeholders views pertaining to the formation of a Minority Shareholders’ Association to represent the concerns of minority investors and to protect their shareholders’ rights and interests. We request you to describe any alternative approaches you think would achieve our initiation,” it said.

The SEC notice also invited former Executive Directors/Chairmen of listed companies who have served more than five years for a discussion to share their ideas on the proposed association “with a view to encourage a constructive dialogue with public listed companies on matters concerning minority shareholders whilst minimising obstacles to operations and management of listed companies.”

The SEC move to encourage the formation of such an association is commendable but raises some questions on processes and whether the association would be allowed to operate as an independent body or not. In fairness to the authorities however these issues would only be addressed once public comments are made from all stakeholders and a final decision taken on the structure and objectives of this association.
There are two points of concern in the SEC notice: (1) the invitation to executive directors/chairmen for a discussion could lead to some bias in the ultimate formation of the association. In fairness to the other stakeholders too, other sections of investors (or their representatives) should also be invited for such a meeting. After all, the interests of management, directors and ordinary shareholders are common: that the company should do well, achieve profits with good governance structures, pay good dividends to shareholders and furthermore raise the profile to increase its share value. These are common objectives and it would unfair for the SEC to call only one section of a company for such a discussion.

(2) Hopefully this notice has been published in Sinhala and Tamil too. The government and the SEC/CSE have been actively promoting the stock markets particularly to small investors and, one of the complaints (raised by the Kurunegala investors) is that the SEC and CSE communications are only in English.

This is a valid issue. How can the SEC/CSE promote the stock market in only one language if the whole objective – like what former Deputy Finance Minister Prof. G.L Peiris and other government politicians have said – is to create a ‘share-owning’ democracy!

While there are few heated arguments or confrontation over accounts or other issues at annual general meetings (AGMs) of listed companies – and in most cases, these are docile meetings – in the instances where there have been confrontation between small investors and board directors, invariably small shareholders don’t get their queries properly responded to and are considered a ‘nuisance’.

There are pros and cons to this argument. On one side, there are shareholders who could be accused of ‘pestering’ the board with ‘unnecessary’ questions. On the other hand, there are minority shareholders who raise valid questions, like good governance activist K.C. Vignarajah, but who are also considered a ‘nuisance’ by board directors who wiggle out of situations with some excuse when unable to respond to crucial questions.
While this may sound improbable to implement and would draw opposition from listed companies, one solution would be for independent observers (maybe SEC officials) to be present at AGMs to ensure the interests of both sides – management/directors and minority shareholders – are looked after at these meetings.

In the meantime, are the listed companies doing their due by shareholders? It is one thing to promote IPOs, debentures or rights issues but another matter when these companies do not provide information to shareholders in a timely manner. In a newspaper notice on Friday, the Registrar of Companies issued a warning to ‘all incorporated companies’ saying that some companies have failed to submit their annual reports and not held their AGMs within 30 working days as per Section 133 (1) of the Companies Act. The notice does not specify the year of accounts.
The penalty for defaulters is a fine of Rs.100,000 (meagre amount) and Rs. 50,000 on company directors. While this applies to all companies (listed and non-listed), there are many listed companies that have failed to furnish reports on time and requires stringent action from the SEC/CSE.

In the meantime, ‘individual’ elements who controlled the stock market some years ago and forced the resignation of at least two heads of the SEC, are still lurking around.

In the formation of the minority investors’ association the SEC should ensure these elements don’t infiltrate and take control and transform it into their own ‘club’ with the real, small investors compelled to watch from the sidelines. That will be a test of the SEC and its current, stated policy of being strict and ensuring clean governance, in the market.

http://www.sundaytimes.lk/

1) No one – the authorities  is listening to their plea for adequate returns from their investments.
???? how can SEC/CSE give this ? FD rates ?

Can you believe this A & B  :-
A) From the point of their investing in the market they have not only received any returns, but as things stand now they have lost their money, too.

B) The KSIA President pointed out that after going through the financial statements of companies only they decide to invest.....  

So they studied the reports and invested , still no return.


2)  KSIA has been agitating persistently to get adequate returns on their investments  ... ?

You invest in PC House, CIFL and TWOD and agitating to get returns...


3)  there should be a safety net to safeguard the investments in any financial institution or in the stock market. If this vitally important safety net (by way of an insurance scheme) is not provided, they would call on all the prospective investors not to invest in any financial institution or the stock market.

Insurance for the crap you buy ?

This means you buy PCH @ 100 and when it touch  2/- , the insurance company will pay you back 98 ?

Those who have no clue about risks of stock market investment should stay away from it. I think Kurunegala fellows needs to read more about the subject of investment and should avoid this type of ridiculous demands.

I think there is some validity in what KSIA is telling.

They blame (a) the propaganda campaigns of boosting crap shares by promoters, (b) accountants and auditors who prepare & audit company accounts who white wash frauds(including their professional bodies) and (c) statutory authorities (CBSL, SEC & CSE) responsible for regulating all these matters.

Small Investors who have no insider information rely on what is published by interested parties. If the regulators sleep with the manipulators how can KSIA have fath on them?

Now only the SEC has wakenup from a long slumber on their promise of a SIA & publish a press notice recently. http://www.sec.gov.lk/?p=8170

?Has any one seen this consultative paper No: 21, as such, other than the press notice. I tried my best to find out but failled. There are only 20 consultative papers in the SEC web. ?Where is paper 21 referred to in the press notice. This is utter neglect of duty by the authorities.

Hence, KSIA having no faith in any one {either (a), (b) or (c) discribed above} who are responsible for the current tragedy is justified.

chinwi wrote:
Insurance for the crap you buy ?

This means you buy PCH @ 100 and when it touch  2/- , the insurance company will pay you back 98 ?

Shoeshine boys should stay away from the stock market, but in our country because of greed the shoeshine boys chase golden key level returns, fall into trouble and expect the tax payers to bail them out. All the lazy matta types expect a hand out when they fall into trouble this is one of the main problems in our country.

If they want a insurance scheme they should get KC Vignarajah to liquidate his 3billion+ portfolio and start the scheme. Viggy is getting senile in his old age. His family better put a testamentary/senility case against him soon.

jiggysaurus wrote:

chinwi wrote:
Insurance for the crap you buy ?

This means you buy PCH @ 100 and when it touch  2/- , the insurance company will pay you back 98 ?

Shoeshine boys should stay away from the stock market, but in our country because of greed the shoeshine boys chase golden key level returns, fall into trouble and expect the tax payers to bail them out. All the lazy matta types expect a hand out when they fall into trouble this is one of the main problems in our country.

If they want a insurance scheme they should get KC Vignarajah to liquidate his 3billion+ portfolio and start the scheme. Viggy is getting senile in his old age. His family better put a testamentary/senility case against him soon.

Correct, these cry babies are the type of same dumbos who put their whole asset in Golden Key, Sakwithi and Danduwam Mudalali.