Securities Council

(1) There shall be established a Council which shall be called the Securities Council (hereinafter referred to as “the Council”) consisting of the persons who are members thereof under section 3.

(2) The Council shall, by the name assigned to it by subsection (1), be a body corporate and shall have perpetual succession and a common seal and may, sue and be sued in such name.

(1) The Council shall consist of-

(2) The Minister shall nominate. from amongst the members of the Council, one member to be the Chairman of the Council.

(1) Any appointed member of the Council may at any time resign his office by letter to that effect addressed to the Minister and such resignation shall take effect upon it being accepted by the Minister in writing.

(2) The Minister may, by Order published in the Gazette, remove, any appointed member from office without assigning any reason therefor and such removal shall not be question in any court.

(3) In the event of the vacation of office by death, resignation or removal of any appointed member, the Minister may appoint another person, having regard to the provisions of paragraph (a) of subsection (1) of section 3, to hold office for the unexpired period of the term of office of the number whom he succeeds.

(4) if any appointed member of the Council is temporarily unable to perform the duties of his office during any period due to ill-health or absence from Sri Lanka or far any other cause, the Minister may appoint some other person to act in his place during such period having regard to the provisions of paragraph (a) of subsection (1) of section 3.

(1) The Chairman of the Council shall. if present, preside at all meetings of the Council. In the absence of the Chairman from any such meetings, the members present shall elect one of the members to preside to such meeting.

(2) The quorum for any meeting of the Council shall be five members and the Council may subject to the requirement as to quorum, regulate the procedure in regard to the meetings of the Council and the transaction of business at such meetings.

(3) All questions for decision at any meeting of the Council shall be decided by the vote of the majority of the members present. In the case of an equality of votes the member presiding shall have a casting vote.

(1) If the Chairman of the Council is, by reason of illness or absence from Sri Lanka temporarily unable to perform the duties of his office the Minister shall nominate other member of the Council to act in his place.

(2) The Minister may, without assigning any reason therefor, terminate the appointment of the Chairman.

(3) The Chairman may at any time resign from the office -of Chairman by a letter addressed to the Minister. Such resignation shall take effect upon it being accepted by the Minister in writing.

(4) Subject to the provisions of subsections (2) and (3) the term of office of the Chairman shall be his period of membership of the Council.

(1) The seal of the Council shall be in the custody of the Council.

(2) The seal of the Council may be altered in such manner as may be determined by the Council.

(3) The seal of the Council shall not be affixed to any instrument or document except in the presence of the members of the Council who shall sign the instrument in token of their presence.

(a) the creation and maintenance of a market in which securities can be issued and traded in an orderly and fair manner;

(b) the protection of the financial interest of investors;

(c) the operation of a Compensation Fund to protect investors from financial loss arising from the failure of a licensed stock broker or licensed stock dealer to meet his contractual obligations; and

(d) the regulation of the securities market and to ensure that professional standards are maintained in such market.

(a) to grant a licence to a body corporate to operate as a stock exchange and ensure the proper conduct of its business;

(b) to grant a licence to any person to operate as a stock broker or a stock dealer as, the case may be, and ensure the proper conduct of their business;

(c) to give directions to a licensed stock .exchange from time to time ;

(d) to grant compensation to any investor who suffers pecuniary loss resulting from the failure of a licensed stock broker or a licensed stock dealer to meet his contractual obligations;

(e) to advise the Government on the development of the securities market;

(f) to employ such officers and servants as may be necessary for the purpose of carrying out the work of the Council;

(g) to frame rules on matters in respect of which rules are required to be made under this Act;

(h) to suspend or cancel the listing of any securities or the trading of any given securities, for the protection of investors;

(i) to inquire into the business affairs of a licensed stock exchange, stock broker or stock dealer and public companies listed with a licensed stock exchange;

(j) to publish findings of malfeasance by any licensed stock broker or stock dealer or any public company listed with the licensed stock exchange;

(k) to implement the policies and programmes of the Government with respect to the market in securities;

(l) to acquire in any manner whatsoever and hold, take or give on lease or hire, mortgage, pledge, sell or otherwise dispose of any immovable or movable property; and

(m) to do all such other acts as may be incidental or conducive to the attainment of the objects of the Council or the exercise of its powers ,under this Act.

(a) conduct regular inspections of the activities of licensed stock exchanges, stock brokers and stock dealers hi order to determine whether they are operating in conformity with the rules and regulations made under the provisions of this. Act; and

(b) require licensed stock brokers and stock dealers to file with the Council, annual balance sheet and in come statements, certified by a qualified auditor in the form and manner specified by the Council.

(a) any body corporate which is carrying on or intends to carryon the business of operating a stock exchange; or

(b) any person who is carrying on or who intends to carry on the business of a stock broker or, of a stock dealer,

(1) On receipt of an application made under section 15, the Council having considered the particulars stated therein and, where it deems necessary, having given the applicant an opportunity of being heard, in person or by a representative, shall by written notice to the applicant, inform the applicant whether he is being granted licence or not.

(2) Where the Council grants a licence to-

(1) A licensed stock exchange may apply to the Council for a renewal of its licence within six months prior to the expiry of the licence.

(2) A licensed stock. broker or a licensed stock dealer as the case may be, may, within three months prior to the expiry of the licence, make an application to the council in the prescribed form together with a prescribed fee for a renewal of his licence.

(3) In granting a renewal of a licence, the Council shall satisfy itself that the licensed stock exchange, the licensed stock broker or the licensed stock dealer as the case may be, has at no time been guilty of contravening any provisions of this Act or any rules or regulations made under this Act.

(1) The Council shall. cancel or suspend the licence granted to a stock broker or a stock dealer, where the Council is satisfied that-

(2) Before the cancellation of a licence granted to a stock broker or a stock dealer in terms of the preceding subsection such stock broker or stock dealer, as the case may be, shall be given an opportunity to show cause as to why such licence should not be cancelled.

(3) Where the licence granted to a stock broker or stock dealer is cancelled, it shall be the duty of such stock broker or stock dealer to forthwith surrender his licence to the Council.

(1) Any person aggrieved by a decision of the Council-

(2) The Secretary to the Ministry of the Minister may require the Council to show cause for its decision to his satisfaction.

(3) An applicant who is aggrieved by the decision of the Secretary to the Ministry of the Minister may appeal against such decision to the Court of Appeal, within fourteen days from the date on which the decision was communicated to the applicant.

(4)Until rules are made under Article 1:16 of the Constitution pertaining to appeals under this section, the rules made under that Article pertaining to application by way of revision to the Court of Appeal shall apply to every appeal made under sub section (3) of this section.

(5) The Court of Appeal may, on an appeal made to it under this section confirm, revise, modify or set aside the decision of the Secretary to the Ministry of the Minister, and may make an order as the interest of justice may require.

(1) The rules of a licensed stock exchange, in so far as they have been approved by the Council, shall not be amended, varied or rescinded without the prior approval of the Council.

(2) Where the Board of Directors of a licensed stock exchange wish to amend its rules it shall forward by written notice to the Council the amendments, whether by rescission, alternation or addition, to such rules which such licensed stock exchange wish to make.

(3) The Council shall, after hearing the licensed stock exchange, and within twenty-one days of receipt of a notice under subsection (2) give written notice to the stock exchange stating whether such amendments to the rules are allowed or disallowed.

(4) Upon receipt of notice under subsection (3), the stock exchange, shall give immediate effect to such notice.

(1) From and after the appointed date, no body corporate or an individual shall use the words” stock exchange “, “stock broker” or “stock dealer” as the case may be unless such body corporate or individual as the ca e may be, has been licensed as a stock exchange or stock broker or stock dealer, by the Council under this Act.

(2) From and after the appointed date, no body corporate or an individual shall carry on business as a stock exchange, stock broker, stock dealer as the case may be, such body corporate or individual is authorized to do so under a licence granted under the provisions of this Act:

Provided, however, any body corporate or an individual who, immediately before the appointed date was carrying, on business as a stock exchange, stock broker or stock dealer as the case may be, shall be entitled to carry on such business without obtaining a licence under this Act-

until the licence is granted or finally refused or the application is withdrawn.

(3) Any body corporate or an individual who contravenes the provisions of subsection (1) or (2), shall be guilty of an offence under this Act and shall on conviction be liable to a fine not exceeding one million rupees.

(a) where such body corporate or an individual is licensed as a stock broker, be granted a licence as a stock dealer; and

(b) where such body corporate or individual is licensed as a stock dealer, granted a licence as a stock broker.

(1) Subject to the provision of subsection (8), an individual who is, or at any time during the six months immediately proceeding the appointed date has been” knowingly connected with a company shall not trade in listed securities of that company if he has information which-

(2) Subject to the provisions of subsections (8) and (9), an individual who is or at arty time in the six months immediately preceding the appointed date has been knowingly connected with a company shall not trade in listed securities of any other company if he has information which

(3) Subject to the provisions of subsections (8) and (9), where-

(4) Subject to the provisions of subsections (8) and (9) where an individual is contemplating, or has contemplated, making, whether with or without another person, a takeover offer for a company in a particular capacity, that individual shall not trade in listed securities of that company in another capacity if he knows that the information that the offer is contemplated or is no longer contemplated is unpublished price sensitive information in relation to those securities.

(5) Subject to the provisions of subsections (8) and (9) where an individual has knowingly obtained, whether directly or indirectly, from an individual to whom the provisions of subsection (4) apply, information that the offer referred to in subsection (4) is being contemplated or is no longer contemplated the first-mentioned individual shall not himself trade in listed securities of that company if he knows that the information is unpublished price sensitive information in relation to those securities.

(6) Subject to the provisions of Subsections (8) and (9) an individual who is for the time being prohibited by any provision of this section from trading in listed securities shall not counselor procure any other person to deal in those securities, knowing or having reasonable cause to believe that person would trade in such listed securities.

(7) Subject to the provisions of subsections (8) and (9), an individual who is for the time being prohibited as aforesaid from trading in listed securities by reason of his having any information, shall not communicate that information to any other person if he knows or has reasonable cause to believe that or some other person will make use of the information for. the purpose of counseling or procuring any other person to trade in such listed securities.

(8) The provisions of this section shall not prohibit an individual by reason of his having any information from-

(9) An individual shall not, by reason only of having information relating to any particular transaction, be prohibited-

if he does that thing in order to facilitate the competition or carrying out of the transaction.

(10) Where a trustee or legal representative, or where a trustee or legal representative is a body corporate, an individual acting an behalf of that trustee or legal representative, who, apart from the provisions of paragraph (a) of subsection (8) would be prohibited by the provisions of this section from counseling or procuring any other person to. trade in listed securities, trades in those listed securities, or counsels or procures arty other person to. trade in them, he shall be presumed to. have acted as referred to in that paragraph if he acted on the advice of a person who-

(1) The provision of this section shall apply to any information which-

(2) The provisions of this section shall apply to a public servant or former public servant holding information to which this section applies and to any individual who knowingly obtained any such information (directly or indirectly) from a public servant or former public servant who, that individual knows or has reasonable cause to believe, held the information by virtue of his position or former position as a public servant.

(3) An individual to whom the provisions of this section apply-

(4) An individual shall not, by reason only of having information relating to a particular transaction, be prohibited by any provision of this section from doing anything, if he does that thing in order to facilitate the completion or carrying out of the transaction.

(1) For the purposes of this Part of this Act, an individual is connected with a company if, and only if

(2) Any reference in this Part of this Act to “unpublished price sensitive information in relation to any listed securities of any company is a reference to information which

(3) In this Part of this Act except where the context otherwise requires

“company” means a listed public company within the meaning of this Act;

“related company”, in relation to any company means any body corporate which is that company’s subsidiary associate or holding company, or a subsidiary of that company’s holding company;

“take-over offer for a company” means an offer made to all the holders (or all holders other than the person making the offer and his nominees) of the shares in the company to acquire those shares or a specified proportion of them, or to all the holders, or all the holders other than the person making the offer and his nominees, of a particular class of those shares to acquire the shares of that class or specified proportion of them.

(1) The Council shall have its own Fund.

(2) There shall be paid into the Fund-

(3) There shall be paid out of the Fund all such sums of money required to defray the expenditure incurred by the Council in the exercise, discharge and performance of its powers functions and duties.

(1) The Council shall cause proper books of accounts to be kept of the income and expenditure, assets and liabilities and all other transactions, of the Council.

(2) The provisions vi Article 154 of the Constitution relating to the audit of accounts of public corporations shall apply to the audit of the accounts of the Council.

(1) There shall be established a fund called the Compensation Fund, for the purpose of granting compensation to any investor who suffers pecuniary loss resulting from the failure of a licensed stock broker or licensed stock dealer to meet his contractual obligations.

(2) The Compensation Fund shall consist of such sums of moneys as may be voted upon by Parliament for the purpose of the Fund.

(3) Moneys belonging to the Compensation Fund may be invested by the Council in such manner as may be determined by the Council.

(1) The Minister shall appoint from among the members of the Council, three members who shall comprise the Compensation Committee (hereinafter referred to as the” Committee”) of the Council.

(2) The Committee appointed under subsection (1) shall be responsible for assessing and awarding compensation in respect of any application made under section 40 and the decision of such Committee on any such assessment or award shall for all purposes be final and conclusive.

(1) Any investor who has suffered pecuniary loss due to the failure of a licensed stock broker or a licensed stock dealer to meet his contractual obligation towards such investor may, within three months of the date on which he suffered such pecuniary loss, make an application to the Committee in the prescribed form claiming compensation from the Compensation Fund.

(2) The Committee may from time to time, require an applicant to produce any document or other evidence in support of his claim for compensation. Where the applicant fails to comply with such request, the Committee may disallow his claim.

(3) If at any time the Committee considers it necessary so to do it may hold an inquiry into the claim of the applicant and shall by notice in writing, inform the applicant to be present on such date, and at such time and place as may be specified in the notice. Where the applicant fails to appear for such inquiry on the date set out in the notice, the Committee may disallow his claim.

(1) The Committee may, after examination of the documents and other evidence produced in support of the claim by an applicant, or in any case where an inquiry was held on the conclusion of such inquiry, allow or disallow such claim for compensation.

(2) Where the Committee allows any claim it shall make an assessment of the amount of compensation payable and shall make an award in relation thereto. Notice of such award shall be given in writing to the applicant.

(3) The Council shall make rules relating to the assessment of compensation payable and the assessment of compensation by the Committee under subsection (2) shall be in accordance with such rules.

(1) The Minister shall, in consultation with the Council, appoint a Director-General of the Council, who shall be its chief executive officer. The conditions of employment including remuneration of the Director-General shall be determined by the Minister.

(2) The Director-General shall, subject to the general direction and control of the Council, be charged with the direction of the affairs and transactions of the Council, the exercise, discharge and performance of its powers, functions and duties, and the administration and control of the employees of the Council.

(3) The Director-General may, with the approval of the Council, whenever he considers it necessary to do so, delegate to any employee any power, function or duty conferred or imposed on or assigned to him by this Act and such employee shall exercise, discharge and perform such power, function or duty subject to the general or special directions of the Director-General.

(4) The Minister may remove from office the Director-General appointed under subsection (1) and such removal shall not be called in question in any Court.

(1) The Council may appoint such other officers and servants as it considers necessary for the efficient discharge of its functions.

(2) The officers and servants appointed under subsection (1) shall be remunerated in such manner and at such rates and shall be subject to such conditions of service as may be determined by the Council.

(3) At the request of the Council any officer in the public service may, with the consent of the officer and the Secretary to the Ministry of the Minister in charge of the subject of Public Administration, be temporarily appointed to the Council for such period as may be determined by the council with like consent, or be permanently appointed to such staff.

(4) Where any officer in the public service is temporarily appointed to the staff of the Council, the provisions of subsection (2) of Section 13 of the Transport Board Law, No. 19 of 1978, shall, mutatis mutandis, apply to and in relation to him.

(5) Where any officer in the public service is permanently appointed to the staff of the Council, the provision of subsection (3) of section 13 of the Transport Board Law, No. 19 of 1978, shall, mutatis mutandis, apply to and in relation to him.

(6) Where the Council employs any person who has agreed to serve the Government for a specified period, any period of service to the Council by that person shall be regarded as service to the Government for the purpose of discharging the obligations of such agreement.

(7) At the request of the Council any member of the Local Government Service or any other officer, or servant of a local authority, may, with the consent of such member, officer or servant and the Local Government Service Commission, or the local authority, as the case may be, be temporarily appointed to the staff of the Council for such period as may be determined by the Council with like consent or be permanently appointed to such staff on such terms and conditions including those relating to pension or provident fund rights as may be agreed upon by the Council and the Local Government Service Commission or that local authority.

(8) Where any member of the Local Government Service or any officer or servant of any local authority is appointed temporarily under subsection (7) to the staff of the Council, he shall be subject to the same disciplinary control as any other member of such staff.

(1) At the request of the Council any officer or servant of a public corporation may, with consent of such officer or servant and the governing board of such corporation, be temporarily appointed to the staff of the Council for such period as may be determined by the Council with like consent or with like consent be permanently appointed to the staff of the Council on such terms and conditions, including those relating to pension or provident fund rights, as may be agreed upon by the Council and the governing board of such corporation.

(2) Where any person is appointed whether temporarily or permanently under subsection (1) to the staff of the Council he shall be subject to the same disciplinary control as any other member of the staff.

(1) For the purpose of enabling the Council to exercise, perform and discharge any of its powers, functions and duties under section 13 of this Act, the Council or any, person authorized in that behalf by the Council may by notice in writing require any person to furnish to the Council or to the person authorized, within such period as shall be specified in the notice, all such returns or information as shall be specified in such notice.

(2) It shall be the duty of any person who is required to furnish any return or information by a notice under subsection (1) to comply with such requirement within the time specified in such notice, except where such person is precluded from making such return’ or divulging such information under the provisions of any law.

(3) The Council or any member thereof, or any officer or servant of the Council, shall not disclose to any person or use any returns or information acquired under subsection (1), except when required to do so by a court of law or for the purposes of achieving, the objects of the Council.

(1) The Council may establish a Committee consisting of three members of the Council to hear and determine complaints of shareholders of any public company listed in a licensed stock exchange, relating to the professional conduct or activities of such stock exchange, any licensed stock broker, or stock dealer of such exchange.

(2) The Committee may, on receipt of any written complaint made by any shareholder, examine the documents and other evidence produced, if any, in support of such complaint, and determine whether such licensed stock exchange or any licensed stock broker or stock dealer of such stock exchange has violated any provisions of the Act or any rule or regulation made under this Act. No such determination shall be made without affording such licensed stock exchange, licensed stock dealer, or stock broker, an, opportunity of being heard.

(3) Where the Committee determines ,that a licensed stock exchange or any licensed stock broker or stock dealer, of such exchange has violated any provisions of this Act or any rule or regulation made under this Act, the Committee shall recommend to the Council the nature of action to be taken against such licensed stock exchange, or any licensed stock broker or stock dealer, as the case may be.

(4) The Council shall upon receiving such recommendations made by the Committee under subsection (3) , take such action as it may deem expedient, in accordance with the provisions of this Act.

(1) No suit or prosecution shall be instituted against any member of the Council or against any of the officers or servants of the Council for any act which in good faith is done or purported to be done by such person under this Act or on the direction of the Council.

(2) Any expenses incurred by the Council in any suit or prosecution brought by or against it before any court, shall be paid out of the Fund of the Council, and any costs paid to, or recovered by the Council in any such suit or prosecution shall be credited to the Fund of the Council.

(3) Any expenses incurred by any such person as is referred to in subsection (1) in any suit or prosecution brought against him before any court in respect of any act which is done or purported to be done by him under this Act or on the direction of the Council shall, if the court holds that such act was done in good faith be paid out of the Fund of the Council, unless such expenses are recovered by him in such suit or prosecution.

(1) Any person who-

shall be guilty of an offence under this Act.

(2) Any person who is found guilty of an offence under this Act for which no penalty is expressly provided for under this Act, shall liable on conviction after summary trial by a Magistrate, to a sentence of imprisonment of either description for a period not exceeding five years or to a fine not exceeding ten million rupees or to both such imprisonment and fine.

(1) The Minister may make regulations in respect of matters required by this Act to be prescribed or in respect of which regulations are authorized to be made.

(2) Every regulation made by the Minister shall be published in the Gazette and shall come into operation on the date of such publication or on such later date as may be specified in the regulation.

(3) Every regulation made by the Minister shall, as soon as it is convenient after its publication in the Gazette, be brought before Parliament for approval. Any regulation which is not so approved shall be deemed to be rescinded as from the date of such disapproval, but without prejudice to anything previously done thereunder.

(4) Notification of the date on which any regulation is deemed to be rescinded shall be published in the Gazette.

(a)listing of securities in a licensed stock exchange;

(b) disclosures by dealers about share transactions, by persons who acquired or disposed of securities and by a licensed stock exchange about security transactions;

(c) Proper maintenance of books, records, accounts and audits by licensed stock dealers and licensed stock brokers and regular reporting by such licensed stock dealers and licensed stock brokers to the council of their affairs.