As enacted

Contents

Securities and Exchange Commission of Sri Lanka Act 2021 · As enacted · Part VII · General

188. Interpretation

Official English translation. The Sinhala text prevails. Open the official Sinhala text, official PDF on documents.gov.lk

In this Act, unless the context otherwise requires –

“accredited investor” includes-

(a)

an individual -

(i)

whose net personal assets, excluding primary residential property, exceeds two hundred million rupees in value or a higher value as may be determined by the Commission; or

(ii)

whose average annual income in the preceding three years is not less than thirty million rupees or a higher value as may be determined by the

Commission; and

(iii)

who makes a declaration on his experience, ability and sophistication to take on the investment risk;

(b)

a corporate entity with net assets exceeding one thousand million rupees in value as determined by-

(i)

the most recent audited balance sheet of the entity; or

(ii)

in the absence of the audited balance sheet, the most recent balance sheet of the corporate entity certified by the entity as giving a true and fair view of the state of affairs of the entity as of the date of the balance sheet, which date shall be within the preceding twelve months;

(c)

the trustee of a trust as the Commission may specify when acting in that capacity; or

(d)

any entity licensed by the Commission under this Act or such other institution or entity as the Commission may specify by rules;

“Central Bank of Sri Lanka” means the Central Bank of

Sri Lanka established by the Monetary Law Act

(Chapter 422);

“central depository” means a body corporate licensed by the Commission under this Act in order to establish and operate a system for the central handling of securities on an exchange –

(a)

whereby all such securities are deposited with and held in custody by, or registered in the name of the depositor or account holder or his or its nominee for the purpose of dealing in those securities or are effected by means of entries in securities, accounts without the physical delivery of scrips; or

(b)

which permits or facilitates the settlement of securities transactions or dealings in securities without the physical delivery of scrips; and

(c)

to provide other facilities and services incidental thereto, but does not include –

(i)

a central depository operated or established by the Central Bank of Sri

Lanka;

(ii)

a central depositary operated or established in respect of securities issued by the Government of Sri Lanka or the

Central Bank of Sri Lanka; or

(iii)

any person providing, or holding out as providing, a central depository for exempted securities;

“clearing facility” means a facility for the clearing or settlement of transactions in securities;

“clearing or settlement” in relation to a clearing facility includes any arrangement, process, mechanism or service provided by a person in respect of securities transactions by which —

(a)

information relating to the terms of those securities transactions are verified by such person with a view to confirming such transactions;

(b)

parties to those securities transactions substitute, through novation or otherwise, the credit of such person for the credit of the parties;

(c)

the obligations of parties under those securities, transactions are calculated, whether or not such calculations include multilateral netting arrangements; or

(d)

parties to those securities transactions meet their obligations under such transactions, including the obligation to deliver securities or the transfer of funds or the transfer of title to securities between the parties, but does not include -

(i)

the back office operations of a party to the securities transactions referred to in the above;

(ii)

the services provided by a person who has, under an arrangement with another person

(hereinafter referred to as the “customer”), who is in possession or control of securities of the customer, where those services are solely incidental to the settlement of transactions relating to the securities; or

(iii)

any other services as may be specified by the Commission;

“clearing member” means a person who is admitted as a clearing member by the licensed clearing house for clearing and settlement of securities on his own behalf or on behalf of others under the rules of a licensed clearing house;

“collective investment scheme” includes any scheme or arrangement that satisfies the conditions under which a scheme or arrangement made or offered to the public by a company for which–

(a)

the contribution or payments made by the investors, by whatever name called, are pooled and utilized solely for the purpose of the scheme or arrangement;

(b)

the contributions or payments are made to such scheme or arrangement by investors with a view to receive profits, income, produce or property whether movable or immovable from such scheme or arrangement;

(c)

the investors share the risk and the benefit of investment in proportion to their participatory interest in a portfolio of a scheme or on any other basis as may be determined by the parties;

(d)

the property, contribution or investment forming part of the scheme or arrangement, whether identifiable or not, is managed on behalf of the investors; and

(e)

the investors do not have day to day control over the management and operation of the scheme or arrangement, but does not include pools of funds relating to-

(i)

individual investment management arrangements;

(ii)

enterprise initiative schemes;

(iii)

pure deposit based schemes;

(iv)

schemes not operated by way of business;

(v)

debt issues, such as debentures, bonds and loan stock;

(vi)

employee share schemes;

(vii)

franchise arrangements;

(viii)

timeshare schemes;

(ix)

provision of clearing services;

(x)

contracts of insurance;

(xi)

individual pension accounts;

(xii)

occupational and personal pension schemes;

(xiii)

certain body corporates including building societies, cooperative societies, industrial and provident societies and registered friendly societies; or

(xiv)

any similar arrangement to the aforementioned schemes;

“controller” means a person who –

(a)

is entitled to exercise or control the exercise of not less than twenty per centum of the votes attached to the voting shares in the holder;

(b)

has the power to appoint or cause to be appointed a majority of the directors of such holder; or

(c)

has the power to make or cause to be made, decisions in respect of the business or administration of the market institution, collective investment scheme and market intermediary, and to give effect to such decisions or cause them to be given effect to;

“court” means a High Court established under Article 154P of the Constitution for a Province, empowered with civil jurisdiction by Order published in the

Gazette under section 2 of the High Court of the

Provinces (Special Provisions) Act, No.10 of 1996, within the Province for which such High Court is established, or where no such High Court vested with civil jurisdiction is established for any

Province, the High Court established for the Western

Province;

“delist” means to remove listed securities from the official list of an exchange;

“depository participant” means a person who has access to the facilities of a central depository and is admitted as a depository participant under the rules of a central depository;

“derivatives” include futures contracts consisting of an adjustment agreement, futures, options and eligible exchange traded option or any other agreement in a class of agreements specified to be a derivative by the Commission, but shall exclude an agreement which is specified to be a derivative agreement that is not traded on a futures market of a derivatives exchange;

“derivatives exchange” means a body corporate licensed as a derivatives exchange under this Act;

“electronic record” means a written document or other record created, stored, generated, received or communicated by electronic means;

“exchange” means a stock exchange or derivatives exchange licensed under this Act;

“Insurance Regulatory Commission of Sri Lanka” means the Insurance Regulatory Commission of Sri Lanka established by the Regulations of Insurance

Industry Act, No. 43 of 2000;

“issuer” means a person who issues or proposes to issue securities by way of a public offer for sale;

“licensed clearing house” means a body corporate licensed under this Act and whose activities or objectives include the provision of clearing facilities;

“listed foreign entity” means an entity which is not incorporated in Sri Lanka and has been admitted to the official list of a stock exchange licensed by the

Commission under this Act by way of a secondary listing;

“listed public company” means any company which has its securities listed on a stock exchange, and includes any public corporation which has its securities listed on a stock exchange licensed by the Commission under this Act;

“listed securities” mean, any security listed on an exchange licensed by the Commission under this

Act;

“manager” in relation to a body corporate means a person who is appointed by the body corporate to manage any part of its business and includes an employee of the body corporate (other than the chief executive officer) who under the immediate authority of a director or chief executive officer of the body corporate, exercises managerial functions or is responsible for maintaining accounts or other records of the body corporate;

“margin account” means, a brokerage account that allows an investor to buy or sell listed securities generally serving as collateral to purchase listed securities for credit;

“market institution” means, an exchange, clearing house or central depository licensed by the Commission under Part II of this Act;

“market intermediary” includes any person licensed as a credit rating agency, corporate finance advisor, derivatives broker, derivatives dealer, investment manager, managing company, margin provider, market maker, stock broker, stock dealer, underwriter or any other person who undertakes similar activity and described by rules for the purpose of issuing such licence by the Commission:

For the purposes of this definition-

(a)

“corporate finance advisor” means any person who for a fee or commission engages in the business of providing advice, on-

(i)

compliance with or in respect of fund raising requirements as provided for under this Act;

(ii)

compliance with the listing requirements of an exchange licensed under this Act;

(iii)

structuring of financial products; or

(iv)

schemes of arrangement, schemes of restructuring or takeovers of a listed public company, but shall not include –

(A)

any attorney-at-law in practice who engages in giving advice in relation to any of the above solely incidental to the practice of his profession;

(B)

any accountant in practice who engages in corporate finance advice solely incidental to the practice of his profession; or

(C)

any company which engages in corporate finance advice solely for its benefit or for any of its related companies;

(b)

“credit rating agency” means a body corporate engaged in the business of assessing and evaluating the credit-worthiness of any issuer or a specific issue of securities;

(c)

“derivatives broker” means any person engaged in the business of buying or selling of derivatives on behalf of investors in return for a commission;

(d)

“derivative dealer” means any person engaged in the business of trading in derivative contracts on his own account;

(e)

“investment manager” includes a person who for a fee or commission engages in the business of managing a portfolio of securities on behalf of an investor but shall not include the manager of a collective investment scheme;

(f)

“managing company” means a company by which a unit of a unit trust scheme, a real estate investment trust, an exchange traded fund or collective investment scheme –

(i)

has been or is proposed to be issued or offered for subscription; or

(ii)

in respect of which an invitation to subscribe or purchase has been made, and includes any person for the time being performing the functions of a managing company.

(g)

“margin provider” means a person who is in the business of providing credit to investors to purchase securities traded on an exchange licensed by the Commission under this Act;

(h)

“market maker” means a person who enters bid and offer prices in the order book maintained in the automated trading system of an exchange licensed by the Commission for a specified security based on the requirements or rules stipulated by such exchange;

(i)

“stock broker” means any person engaged in the business of buying or selling of securities other than derivatives on behalf of investors in return for a commission;

(j)

“stock dealer” means a body corporate in the business of buying or selling of securities other than derivatives for his own account;

(k)

“underwriter” means any body corporate which in connection with a public offer of securities, guarantees to purchase unsubscribed portion of such securities for a fee or commission or who negotiates with an issuer of securities to purchase such securities in the event of the offer being not fully subscribed;

“market operator” means a person who establishes market infrastructure that facilitates trading, clearing or settlement of unlisted securities as provided in

Part IV;

“Minister” means the Minister assigned the subject of

Securities and Exchange Commission of Sri Lanka under Article 44 or 45 of the Constitution;

“Monetary Board of Sri Lanka” means the Monetary

Board of the Central Bank of Sri Lanka established under the Monetary Law Act, (Chapter 422);

“offer” or “offering” includes any attempt to sell or dispose of any securities or interest in such security for value by means of a prospectus or otherwise to the public, but does not include a bona fide invitation to any person, to enter into an underwriting agreement in respect of any such securities;

“private placement” means an issue of securities to an identified investor or category of investors other than by way of a rights issue which is offered pro-rata to the existing shareholders or a general offer to the public for subscription;

“persons acting in concert” means persons who pursuant to an agreement or understanding, whether formal or informal, co-operate, through the acquisition by any of them of any interests in shares in a company, or any other company, or to frustrate the successful outcome of an offer for a company. Without prejudice to the general application of this definition, the following persons shall be presumed to be persons acting in concert with each other unless the contrary is established to the satisfaction of the Commission: -

(a)

a company, its parent, subsidiaries and fellow subsidiaries, and each of their associate companies, and any person who has provided financial assistance (other than a bank licensed or a finance company registered by the Central Bank of Sri Lanka in the ordinary course of business) to any of the aforesaid persons for the purchase of voting rights, all with each other;

For the purposes of this paragraph, an

“associate company” is a company as defined in terms of the Sri Lanka Accounting and

Auditing Standards made under Sri Lanka

Accounting and Auditing Standards Act,

No.15 of 1995;

(b)

a company with any of its directors together with their close relatives, related trusts as well as companies controlled by any of the directors, their close relatives and related trusts;

(c)

a company with any of its pension funds and employee share schemes;

(d)

a fund manager with any investment company, unit trust or other person whose investments such fund manager manages;

and

(e)

a person, a person’s relation and the related trusts of any of them, all with each other;

For the purposes of this paragraph

“relation” means a parent, spouse, child including step children, brother or sister including step brother or step sister of that person or the spouse of a child of that person;

“prospectus” shall have the same meaning as in the

Companies Act, No. 7 of 2007;

“public notice” means a notice of any matter that is required to be given under this Act, which shall be given by publishing a notice of that matter in at least one issue of the Gazette and in at least one issue of a daily newspaper in Sinhala, Tamil and

English languages, circulating within Sri Lanka;

“registered person” means any person dealing with clients for and on behalf of a market intermediary and who is registered by the Commission under this Act;

“related company” means any subsidiary, associate or holding company or a subsidiary of the holding company of a body corporate;

“rights issue” means an issue of any share or shares to be issued in the future, of a listed public company to existing shareholders of such company, howsoever such issue is described or referred to, for consideration, and in proportion to the class of securities held by them in such company on the date of such offer;

“securities” include-

(a)

debentures, stocks, shares, funds, bonds, units in a collective investment scheme or any right, options or interests therein; or

(b)

derivatives including futures and options, whatever the nature of the underlying asset relied on; or

(c)

notes issued or proposed to be issued by any

Government or any other incorporate or unincorporate body, but does not include bills of exchange or promissory notes or certificates of deposits issued by a bank, securities issued by the Government of

Sri Lanka or the Central Bank of Sri Lanka or such other product or class of products prescribed as not being securities under section 182;

“securities market” means a market or other place or facility where –

(a)

offers to sell, purchase or exchange of securities are regularly made or accepted;

(b)

Offers or invitations that are intended, or may reasonably be expected to result, whether directly or indirectly, in the making or acceptance of offers to sell, purchase or exchange securities, are regularly made; or

(c)

information concerning the prices at which or the consideration for which, particular persons, or particular classes of persons, propose, or may reasonably be expected to sell, purchase or exchange securities is regularly provided, but shall not include a securities market regulated by the Central Bank of Sri Lanka for the purpose of this Act;

“share” shall have the same meaning as is given in the

Companies Act, No.7 of 2007 or as recognised in another jurisdiction as a share under its laws;

“stock borrower” means a person who is engaged in the business of borrowing securities;

“stock exchange” means a body corporate licensed as a stock exchange by the Commission under this Act;

“supplementary service provider” includes an actuary, auditor, custodian, trustee, valuer or such person as may be specified by the Commission who provides professional services to a market institution, market intermediary or listed public company or to a collective investment scheme;

“trading participant” means a person who has access to the facilities of an exchange and is admitted as a trading participant under the rules of an exchange licensed by the Commission under this Act;

“whistleblower” means any individual or group of persons who provides, information relating to a violation or potential violation of the provisions of this Act, regulations, rules or directives made thereunder or any rule of a market institution.

Read on from s 189