Securities and Exchange Commission of Sri Lanka (Amendment) Act 2003

This Act may be cited as the Securities and Exchange

Commission of Sri Lanka (Amendment) Act, No. 18 of 2003.

The long title to the Securities and Exchange

Commission of Sri Lanka Act, No. 36 of 1987 (hereinafter referred to as the “principal enactment”) as amended by Act,

No. 26 of 1991, is hereby further amended by the substitution for the words “TO GRANT LICENCES TO STOCK

EXCHANGES, UNIT TRUST, STOCK BROKERS AND

STOCK DEALERS WHO ENGAGE IN THE BUSINESS OF

TRADING IN SECURITIES;”, of the words “TO GRANT

LICENCES TO STOCK EXCHANGES, MANAGING

COMPANIES IN RESPECT OF EACH UNIT TRUST, STOCK

BROKERS AND STOCK DEALERS WHO ENGAGE IN THE

BUSINESS OF TRADING IN SECURITIES; TO REGISTER

MARKET INTERMEDIARIES;”.

Section 12 of the principal enactment as amended by

Act, No. 26 of 1991 is hereby further amended in paragraph (c) thereof by the substitution for the words “from the failure of a licensed stock broker or licensed stock dealer to meet” of the words “as a result of any licensed stock broker or licensed stock dealer being found incapable of meeting”.

Section 13 of the principal enactment as amended by

Act, No. 26 of 1991 is hereby further amended as follows :—

by the insertion, immediately after paragraph (bb)

by the repeal of paragraph (c) of that section and the substitution therefor of the following paragraph :—

by the substitution in paragraph (d) of that section for the words “resulting from the failure of a licensed stock broker or a licensed stock dealer to meet” of the words, “arising as a result of any licensed stock broker or licensed stock dealer being found incapable of meeting”;

by the insertion immediately after paragraph (f) of that section, of the following new paragraphs :—

by the substitution in paragraph (h) of that section, for the words “any given listed securities”, of the words “any listed securities”;

by the repeal of paragraph (i) of that section, and the substitution therefor of the following paragraph :—

by the repeal of paragraph (j) of that section and the substitution therefor of the following paragraph :—

by the repeal of paragraph (n) of that section and the substitution therefor of the following paragrahps :—

Section 14 of the principal enactment as amended by

Act, No. 26 of 1991, is hereby further amended as follows :–

by the repeal of paragraph (a) of that section and the substitution therefor of the following paragraph :–

by the substitution in paragraph (b) of that section for the words “ licensed stock exchanges, stock brokers, stock dealers and the managing companies of licensed unit trust”, of the words “licensed stock exchanges, licensed stock brokers, licensed stock dealers, licensed managing companies of unit trusts and registered market intermediaries ” ; and

by the substitution in paragraph (c), of that section for the words “the managing company of a licensed unit trust” and “the prescribed particulars.”, respectively, of the words “the licensed managing company of a unit trust ” and “such particulars as may from time to time be determined by the

The following new sections are hereby inserted immediately after section 14 and shall have effect as sections 14A and 14B of the principal enactment :–

14A. (1) There shall be charged, levied and paid a cess at such rates as may be specified by the Minister by Order published in the Gazette on every purchase and sale of securities recorded in a licensed stock exchange or notified to it under its rules by both the purchaser and the seller. Different rates may be specified in respect of different classes of securities.

The cess imposed under this section shall be in addition to any other tax or cess levied under any other written law.

There shall be paid out of the Cess Fund such sums as may be authorised by the

developing the securities market ;

enhancing monies lying to the credit of the Compensation Fund established under section 38 ; and

exercising, performing and discharging the powers, duties and functions of the

The money lying to the credit of the Cess

The heading appearing in Part III immediately before section 15 of the principal enactment is hereby repealed and the following heading substituted therefor :–

“GRANT OF LICENCE TO A STOCK EXCHANGE, A STOCK BROKER

OR A STOCK DEALER AND THE REGISTRATION OF MARKET

INTERMEDIARIES”

Section 15 of the principal enactment is hereby amended by the repeal of all the words from “shall make an application ”, to the end of that section, and the substitution of the following therefor :–

“shall make an application to the Commission for the grant of a licence as a stock exchange, stock broker or a stock dealer, as the case may be, in such form, together with such documents and such fee as may be specified by the Commission from time to time in that behalf. ”.

Cess Fund.

Securities and Exchange Commission of Sri Lanka

The following new section is hereby inserted immediately after section 19 and shall have effect as section 19A of the principal enactment :—

19A. (1) Any person who is carrying on or who intends to carry on business as a market intermediary shall register with the Commission for such purpose.

An application for the purpose of registration under subsection (1) shall be made to the Commission in such form, together with such documents and such fee as may be prescribed by the Commission from time to time in that behalf.

On receipt of an application for registration, the Commission having considered the particulars stated therein and where it appears necessary having given the applicant an opportunity of being heard, shall by written notice inform the applicant whether he is being registered as a market intermediary or not, and where he is registered as a market intermediary, issue him with a certificate of registration valid for a period of one year effective from the date of issue of such certificate. Every person issued with a certificate of registration is referred to in this Act as a “registered market intermediary.”.

No person shall be registered as a market intermediary unless he complies with the terms and conditions set out in Part V of the

Section 20 of the principal enactment as amended by Act No. 26 of 1991 is hereby further amended as follows :—

in subsection (1) of that section by the substitution for the words “within six months prior to the expiry”, of the words “six months prior to the expiry” ;

by the repeal of subsection (2) of that section and the substitution therefor of the following subsection :—

in subsection (3) of that section, by the repeal of all the words from “ a renewal of a licence,” to “as the case may be, ” and the substition of the following therefor :—

Section 21 of the the principal enactment as amended by Act No. 26 of 1991 is hereby further amended in subsections (4) and (5) of that section by the substitution for the words “licensed stock broker or stock dealer ”, wherever those words occur in those subsections, of the words “licensed stock broker or licensed stock dealer ”.

The following new section is hereby inserted immediately after section 21 and shall have effect as section 21A of the principal enactment :—

21A. (1) The Commission shall have the power to suspend or cancel the certificate of registration granted to a market intermediary under section 19A of this Act.

Securities and Exchange Commission of Sri Lanka

The provisions of section 21 of this Act shall, mutatis mutandis, apply to, and in relation to, any suspension or cancellation as the case may be, of a certificate of registration under subsection (1). ” .

Section 22 of the principal enactment as amended by Act No. 26 of 1991 is hereby repealed and the following section is substituted therefor : —

22. (1) Any person aggrieved by the decision of the Commission —

suspending or cancelling a licence under section 18A ;

refusing to grant a licence under section 19 or a registration under section 19A ;

refusing to grant a renewal of a licence or registration as the case may be under section 20; or

cancelling or suspending a licence or a registration as the case may be, under sections 21 or 21A ;

Until rules are made under Article 136

The Court of Appeal may, on an appeal made to it under subsection (1), reverse, modify or set-aside the decision made by the

Section 25 of the principal enactment as amended by Act No 26 of 1991 is hereby further amended as follows :—

by the repeal of subsection (1) of that section and the substitution therefor of the following subsection :—

by the insertion immediately after subsection (1) of that section of the following new subsection :—

Section 28 of the principal enactment as amended by Act No. 26 of 1991 is hereby further amended as follows :—

in subsection (1) of that section—

in subsection (2) of that section, by the substitution for the words “stock broker or stock dealer shall ”, of the words “licensed stock broker, licensed stock dealer, the licensed managing company of a unit trust or a registered market intermediary shall”.

The following new section is hereby inserted immediately after section 28 and shall have effect as section 28A of the principal enactment :—

28A. Where shares in any public company are allotted to any person prior to its listing in a licensed stock exchange, no shares or any security convertible to shares in any such company shall be listed on a licensed stock exchange within a period of one year from the date of the last allotment, unless the written approval of the Commission is obtained for that purpose prior to such listing. ”.

The following new section is hereby inserted immediately after section 29 and shall have effect as section 29A of the principal enactment :—

29A. (1) No listed public company or any public company which has applied to obtain a listing in a licensed stock exchange, shall make any issue of securities unless the issue has been approved by the Commission or any person authorized in that behalf by the Commission.

“Prohibition against the listing of shares in certain cases.

‘Issue of securities.

Securities and Exchange Commission of Sri Lanka

For the purposes of this section, “issue of securities ” means —

in relation to a public company which has applied to obtain a listing, an introduction, an offer for subscription, an offer for sale or any placement of securities on a licensed stock exchange ;

in relation to a listed public company —

new issues or offer for sale of securities to the public, whether such issues or offers for sale are by way of public issues or otherwise or any placements of securities ;

rights issues of securities ;

bonus issues of securities;

schemes of arrangements, schemes of reconstruction, take over schemes, share option schemes and acquisition of assets by way of issues of securities.’.

Section 31 of the principal enactment is hereby repealed.

The heading appearing in Part IIIA immediately before section 31A of the principal enactment is hereby repealed and the following heading substituted therefor :—

“GRANT OF A LICENCE TO OPERATE A UNIT TRUST”

Section 31A of the principal enactment is hereby amended by the renumbering of that section as section 31 of that enactment.

Securities and Exchange Commission of Sri Lanka

Section 31B of the principal enactment is hereby repealed and the following section substituted therefor :—

31A. (1) No licence shall be granted under this Part for the operation of a unit trust, unless—

the trustee has been approved by the

the managing company complies with the terms and conditions set out in Part

Notwithstanding the provisions of paragraph (a) of subsection (1), where the trustee approved by the Commission is replaced by the appointment of a new trustee after the issue of a licence, such licence shall be deemed to be valid and continue in force until the new trustee is approved by the Commission.”.

The following new section is hereby inserted immediately after section 31A and shall have effect as section 31B of the principal enactment :—

31B. (1) The Commission shall withdraw the approval of a trustee of a unit trust where the Commission is satisfied that the trustee of that unit trust—

has acted in breach of any provision of this Act or any rules or regulations made thereunder ;

has ceased to be of good financial standing ; or

is guilty of malpractice or irregularity in the management of its affairs.

Upon withdrawal of any approval under subsection (1), the trustee shall be deemed to have retired but such retirement shall not take effect until a new trustee duly approved by the

Section 31C of the principal enactment is hereby amended by the substitution for the words “under section 31A the Commission,”, of the words “under section 31, the

Commission,”.

Section 31D of the principal enactment is hereby amended as follows :—

by the repeal of subsections (1), (2), (3) and (4) of that section, and the substitution therefor of the following subsections :—