SEC pulling out unfinished business in EPF pump and dump transactions

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A decade-old unfinished probe is being relooked at by the capital market regulator.

The Securities and Exchange Commission (SEC) is determined to expedite the probes against capital market offenders that have been in their hands for nearly 10 years.

The freshly opened ones deal in Employees Provident Fund (EPF) investments in the Colombo Stock Exchange (CSE), banking sources revealed to the Business Times on Tuesday.

Viraj Dayaratne, former Chairman SEC managed to complete more than half of the overall SEC probes against offenders and bring culprits to task before he quit.

The country’s largest pension fund stopped putting cash in CSE around 2015 since it was alleged that it had incurred losses through purchasing stocks in companies with artificially bloated share prices during the 2011 to 2013 era. There were questionable transactions in the stock market where allegations of pump and dump have been made, sources said. The peak of the pump and dump was from 2010 to 2011, which led to some Rs. 900 million loss to the pension fund. Whilst Rs. 5 billion, 8.1 billion, and 4.8 billion, respectively, were invested in companies on the CSE during the 2012-2014 period, these figures fell dramatically in the following two years and 2015 and 2016 saw investments in companies quoted on the CSE drop to Rs.1.3 billion both years.

During this time, 5.3 million shares of Ceylon Grain Elevators, 57 million shares of Laugfs Gas, 5.1 million shares of The Finance, 23 million shares of Central Finance, and 1.2 million of Bairaha have been dumped on the EPF.

One of the five forensic reports commissioned by the Central Bank has stated in great detail the pump and dumping in the years between 2011 and 2013, during the earlier Rajapaksa regime. It has specifically highlighted listed and unlisted investments from the year 2011 to 2015. It showed that the pension fund had invested millions of rupees in multiple listed and unlisted companies in power generation, hotels, and finance companies, with the EPF not receiving any income in the form of dividends from these investments till 2016.

In the 2012 annual report where the Auditor General has made a special disclosure of the Fund’s investments and their income states that by 16 December 2013 the EPF had incurred a loss of Rs. 14.4 billion from its investments of Rs. 50.7 billion in 64 companies listed at the CSE.

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