People should be extremely careful in the stock market – Eran Wickramaratna M.P. warns the local investors
Former State Minister of Finance Mr. Eran Wickramaratna said that when we hear the message of share market it was not only the message but we also need to look at the messenger as well.We hear a lot of comments on basically about economy, lots of nice stories and fairy tales are being told, people are being fooled basically focusing on the stock market.
The stock market we saw between 2011 and 2013 there were lots of improper things had happenedand these improper things were investigated by the then CBSL Governor DrIndrajith Coomaraswamy and the Monetary Board took a decision to callfor a Forensic audit and there were five major reports on the Forensic audit in the country.
MrWickramaratna addressing the press at the Office of the Leader of Opposition yesterday said that 0ne such report basically deals with the investment by the Employees Provident Fund EPF and all the problems that involved the EPFfunds. One of the issues that was investigated was pumping and dumping in the years between 2011 and 2013 during the earlier Rajapaksa regime. People responsible manipulated the market. The report very clearly narrates the manipulation that went on during the period where Mr. Mahinda Rajapaksa was the Minister of Finance.
According to report the EPF money was invested sometimes in quoted companies sometimes in unlisted companies. The report also described the major losses incurred to EPF through such improper and manipulated investments they made.
Former State Minister of Finance quoting the page 259 of the Forensic report titled “Final Report The Monetary Board of Sri Lankan by the KPMG described how the former Governor of the Central Bank Mr Ajith Nivard Cabral dodged the inquiry on the issue of EPF investment in the Stock Market and the consequent manipulations of the market when he was the Governor.
People in the responsible positions of the caliber of the CBSL Governor Ajith Nivard Cabral at least should have the decency to go in for these things and answer the questions that are raised but has been avoided by Mr. Cabral as per the Forensic report by the KPMG.
The report reads:
Quote Majority of the investment done by EPF were during the period 2009 and 2013 during the period Mr. Ajith Nivard Cabrala was the Governor of the CBSL and the Chairperson of the Monetary Board MB. We have sent a written question to MrCabraal through CBSL on 03rd October 2019 and have requested for a face to face meeting. There were altogether 5 occasions of communications that took place between the then Governor Dr. Indrajith Coomaraswamy and MrCabraal. We do not have the benefit of his response. CBSL should obtain his response to formulate a holistic view on these transactions. Unquote
MrWickramaratna revealed that the report revealed in view of the specific investments in listed shares that resulted into losses to the EPF, the involvement of the MB or the Governor was noted in the decision – making process. The report also noted that despite the ban on investing in the unlisted companies and the Banks on which the CBSL has the regulatory powers, there have been an investment of Rs 4,475 million in the unlisted companies in addition to investment of Rs 31,158.75 million in five banks from the EPF money to which approval of MrCabraal has been sought through an internal note..
The KPMG investigation report concludes that it was identified that the Audit report for 1998 and 1999 were not available with the EPF dept and the copies were not retrievable even from the AG’s office which is a new phenomenon to be seen.
The losses incurred by EPF in equity investments have been specifically highlighted for listed and unlisted investments from the year 2011 to 2015. The EPF had invested a sum of Rs 500 million in shares of the Sri Lankan Airline in July ,2010 but no revenue yielded since the investment.The EPF had invested in millions of rupees in the unlisted companies in the areas of power generations, Airlines, Hotel sector, Finance Companies and the EPF had not received any income in the form of dividends from the investments since the date of investments till 2016.
All in all the EPF has incurred huge losses in millions of rupees by way of improper investments in the listed and unlisted companies that are engaged in the loss making areas of activities thus making those organizations to maintain its survival.
Return on EPF investments could be perceived as almost zero percent between the year 2008 and 2014 for which the authorities in the CBSL should be held responsible. Non compliance of the rules and regulations are the major loophole in those transactions. The report talks of the involvements of the Governor of the Central Bank or the Monitory Board.
The SJP Parliamentarian said that this is not just the history of EPF, a lesson for the present and the future, unfortunately which is being repeated once again presently. There has been a big outflow of foreign investment from the stock exchange. In terms of rupee value Rs 51 billion outflows was registered in the year 2020 which was 5 percent of the total investment. In 2019 as a part of turn over the foreign investment was over 20 percent. This shows the gravity of the outflow of the foreign investment in the capital market under this government which is boasting of developing the country without foreign assistance.
With the replacement of the foreign investors with the local investment there seems to be a pattern like what happened in 2011 and up to 2014 when there was corruptions in the stock market. People in high offices were involved in the racket according to the forensic report. They had an opportunity to go before auditors and make their case, but they did not make their case due to reasons best known to them.
Sowith regard to the present status of the stock exchange we must be careful, it is not the message but we also have to watch the messenger as we have a lesson to learn from the past. We are living in an era where people have been convicted of murder takes oaths and they come in to Parliament and this is the Sri Lankan system. Rogues , people who have robbed and the people who have not been able to give proper answers against the corruption allegations against them are free today. And those who should be behind the bars for playing out the money of the tax payer and the EPF are also free today.
Mr Eran Wickramatunga drawing the case of MP Ranjan Ramanayaka said that the old and ancient laws have to be updated to suit the present democratic principles. Parliamentarians have to take the responsibility to modernize our laws as in many modern countries the contempt of court laws have been modernized. He said that he was not condoning the fact that institutions and their honour should be protected. People should have the liberty to express themselves, people can make a judgement. In the case of Ranjan Ramanayake was imprisoned for 4 years on the case of contempt of court it demonstrates that something wrong in the system.
In the year 2020 on the EPF investment in the stock exchange was Rs 84 billion and the losses as of September 2020 was Rs 20 billion. Though some people consider share market investment as quick bucks, if we look at the 2011, 2012 and 2013 stories we need to be extremely careful as there may be a repetition of that same story of the past regime now.