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CSE Calling for Comments on the Watch List

This was an email I sent to the CSE when they were calling for comments on proposed changes to the Watch List. I thought the matter to be trivial. The link referred to in the email is broken. I now regret having drafted this email so poorly. It lacks structure and purpose.

Subject:CSE Listing Requirements
From:perera_d94@yahoo.com
To:public.comments@cse.lk
Cc:cbs@cbsl.lk
Date:Tuesday, April 18, 2017, 4:25:35 PM GMT+5:30
Dear Sir,
I shall address my comments by the order that they are written on the PDF document https://cdn.cse.lk/pdf/index-gallery-pdf/Proposed-Enforcement-Rules-30th-March-2017.pdf. I shall try to keep my comments brief.
1. Renaming the Default Board
I am in agreement that the board must be renamed but you have chosen to go in the wrong direction. I suggest the title Non Compliant Companies. This accurately describes the companies under the list and also goes further to warn investors of institutions like Adam Capital that need to be avoided. Online Trading Applications should also be forced to warn investors to avoid these stocks. Identification of bad companies can help the entire economy by helping expedite winding up proceedings on bad companies.
 
2. Corporate Governance
The regulatory body should not constrain companies on their corporate governance. Such regulation is just regulation for the sake of regulation. Let a company structure itself in whatever way the shareholders deem fit. Further companies that are non compliant are probably non compliant for a reason. Adding additional compliance requirements like a compliance statement would do little to solve the problem. The SEC should appoint a body that takes over companies that are non compliant over medium periods of time. Further to allow such regulation, compliance requirements should be kept to a bare minimum.
3. Submission of Financial Statements
 
Again the suggestions here do little to solve the true issue here which is the dishonesty of financial statements. Large corporate institutions are already in bed with the regulator and have the power to influence the audit of their businesses. Further companies with complex financial structures like Softlogic and Vallibel are perennially consuming companies to continue (what I believe to be) a massive Ponzi scheme. Short of forcing them not to expand in the short run it would be difficult to gauge their true financial strength. These companies should be forced to insulate their financial institutions from the rest of their holdings when reporting. Companies can manipulate payments and borrowings so as to suggest that their internal lending is performing well while keeping lines of credit open to their failing businesses. Also share market performance should account for volumes. Companies should show their volume weighted moving averages and their volume weighted average for the period. An annual trade summary should also be within the document.
 
Other
As mentioned in the correspondence to me from Ms Nilupa Perera we must look to account for the base value of a share when reporting the top gainers and losers. I personally like to look at shares that have fallen out of favor with the market. As the market does not account for the base value it is not possible for me to see these shares.
I am sorry for tapering off in my commentary towards the end of the document but I felt this was targeted more at the companies than the small time shareholders and I was short of time. I would like a CSE shirt (Small) to be sent to my house.
P.S
I have also copied in the Central Bank so as to help push the idea of a Bad Debt Bank. A new institution should be set up funded by grants from the treasury to take over troubled companies. This would help prevent larger losses down the road by the state owned banks and the treasury because of poorly managed institutions. It would be good for the economy as well as it would help reallocate resources quickly and allow the economy to better shape itself to the global environment. I also want to note that RACIST BACKWARD INDIA is faster at reform than Sri Lanka. Shame on the Central Bank and the SEC.
Kind Regards
Dinesh Perera
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Commercial Bank and it's Divestment of Commercial Development

Commercial Bank is looking to divest its stake in Commercial Development. Both companies are listed and as such fall within the purview of the SEC. The SEC has under a very misguided policy decided in a very specific sense what the public float of a particular company should be. This policy is highly misguided as market cap is not particularly a strong indication of the value of a company. Commercial Bank falls slightly shy of this public float with regards to its stake in Commercial Development. No pragmatism has been displayed by either the Board of Commercial Bank and or the SEC on this issue. Commercial Bank has slowly divested part of its stake in Commercial Development at huge losses to the shareholder. Low liquidity is not a particularly cancerous issue to a stock exchange. Also a much better cure to that ailment would be a reduction in transaction costs.
26.02.2018 Commercial Bank Letter 
29.09.2017 Commercial Bank Shareholder Letter
SEC Media-Release-Public-Float
 

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Why?

People close to my work ask me why I would decide to go public at this stage. I deal with very strong vested interests and as such it would be dangerous for me to publicly compile my work. I like Ranil and Sri Wickrema Rajasinghe am not scared.
Also Verite Research challenged me to do it;
(Excerpt from his email which I don’t think he would mind me sharing).

Saying something yourself and being prepared to defend your position is a little harder than criticising others for what you think they’re failing to say.
Gehan
 ———- Forwarded message ———-
From: “Dinesh Perera” <perera_d94@yahoo.com>
Date: Feb 28, 2018 17:33
Subject: Attention: Gehan Gunatilleka
To: “publications@veriteresearch. org” <publications@veriteresearch. org>, “reception@veriteresearch.org” <reception@veriteresearch.org>
Cc:
Dear Sir,
Verite Research, a self-defined interdisciplinary think tank has recently under the guise of flattery tried to make me pen my thoughts on the executive presidency. Verite’s funding and articles of association are difficult to come by. The frequency with which their employees appear on the Maharaja network would indicate a shadowy operation. The individuals who approached me on the matter asked me to pen my thoughts on the abolishment of the executive presidency. Here again as with Verite’s verbose involvement with the local government elections, the institution chooses to focus on trivial matters where it is unlikely to find any concerned opposition. Articles of the constitution, much like the local councils are conveniently forgotten when need be. A lot of things are not done in accordance with the constitution. People who argue that the laws need changing fail to notice that even under the previous regime it wasn’t that laws did not exist but rather that they were flouted. The ongoing court cases are a bid to reestablish the rule of law.
                Social science is not a science. What Maithripala does that needs to be done and won’t be done in a world wherein the President and Prime Minister are from one party is objective oversight. Back in the day the role of inquiry currently being held under the authority of Maithripala Sirisena and sometimes under parliament was done by a separate institution called the Senate. In contemporary constitutional discussions the establishment of a senate is popular amongst most major parties. The senate would act as a continuous body of inquiry and as it would be comprised of multiple individuals representing various segments of society, would be better placed as an oversight institution. The debate surrounding the abolishment of the executive presidency is a red herring. There is no one panacea to the poor societal outcomes of the previous regime. Think Tanks are full of individuals geared to create interesting headlines. Think Tank employees think they are better than everyone else. One of us must look to bring them down a peg.
Daham Sirisena beat up people at a night club. This act was illegal. He faced no consequences. What does Verite and it’s social media think of the matter?
Kind Regards,
Dinesh
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The Archival Begins

 

The only thing necessary for the triumph of evil is for good men to do nothing.

Edmund Burke

Read more at: https://www.brainyquote.com/quotes/edmund_burke_377528