The Securities and Exchange Commission (SEC) and the Colombo Stock Exchange (CSE) are in the process of developing the existing listing rules to align with the new law and ethics would be the critical component in the new listing rules of the CSE which will come into force in the near future, Viraj Dayaratne PC, Chairman, SEC told the ICMA (ANZ) Graduation Ceremony held in Colombo last week.
The rules which are applicable to exchanges, central depositories and clearing houses require submission of a compliance manual which among others require such entities to have been placed in a corporate governance framework, which is inclusive of a code of ethics, good business practices and the requirement to follow just and fair principles in the conduct of its businesses. This requirement has also been stipulated in the rules which are applicable to market intermediates, he said.
Similarly, guidelines have also been introduced in respect of supplementary service providers. One other salient feature found in the new law is that obligation is cast on auditors of listed companies, market institutions and market intermediaries to bring to the attention of the boards of the respective companies any irregularities that the auditor has come across during the general conduct of an audit. And if no remedial action is taken during a particular time frame, such matter has to be escalated to the CSE or the SEC as the case may be. In all of these instances cited the intention has not only been to ensure compliance with rules and regulations but to ensure that ethical conduct is upheld by entities, he said.
Similarly, it is of paramount importance for corporates to conduct their affairs in an ethical manner. Unethical behavior in workplaces can create public crises, operational distractions, financial liabilities, and in certain instances, lead to the total collapse of organizations. Given the severe financial and reputational consequences of unethical behavior, it is no surprise that organizational efforts to prevent, detect and respond to them are consistently scrutinised by stakeholders.
“The need for professional ethics has become a critical component even in the capital market as it plays a vital role in ensuring that the stock market functions in a fair, orderly and transparent manner. At the SEC priority is given to ethical conduct and practices, and investor protection lies at the heart of our key functions. The SEC’s commitment towards upholding ethics is signified by the introduction of a corporate governance framework which is now part and parcel of the listing rules of the CSE,” Dayaratne added.
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