In a recent assessment by the International Monetary Fund (IMF), claims go as Sri Lanka being failed in their Securities and Exchange Commission (SEC) that the suspicious trading activity between 2010 and 2011 were not properly probed.
The IMF assessment said Sri Lanka’s SEC has lost its reputation over their failure to probe the 2011 scams, and is currently taking steps to rebuild its effectiveness.
"The SEC has suffered reputational harm as a result because the public had expected the SEC to take action to address apparent trading irregularities by certain high-profile market participants," the report said.
"At the moment, the investigation team has prioritized several re-opened matters involving trading activity in 2010–11, which was a highly volatile period for the CSE.
These matters had been prematurely closed without thorough investigation," the report added.
According to report, the SEC by 2015 had only two investigation officers, and the SEC has now taken several measures in boosting their capacity up with having a new law on the way.
Sri Lanka was at the peak of world’s best performing markets during period which stock market scams heightened – where firms with weak fundamentals were pushed up and dumped on especially on the Employees Provident Fund (EPF) managed by the Central Bank. At a pro-cyclical policy, the Central Bank recovered along with economy following the end of the war in 2009, and in 2011, it cut rates as credit growth picked up.
The bubble ended in a balance of payment crisis.
Economy Next reported, that in the US the Securities and Exchange Commission was also set up after a stock market crash following the so-called 'roaring 20s' economic bubble fired the Federal Reserve, which undermined a gold peg.
Thereafter, the so called 'insider trading' was criminalized in the wake of multiple scams seen during the Fed fired bubble.
The bubble ended with a stock market bubble and the Great Depression with the US dollar being devalued from 22 to 35 dollars to the ounce of gold.
Before a money printing Fed was created in 1916, the US dollar had held its value at 20.67 dollars an ounce from 1799.
The 2011 bubble in Sri Lanka ended with the rupee being depreciated from around 113 to 130 to the USD.
(Source: Economy Next)