The Forensic Audit volume 5 reveals glaring anomalies and shortcomings in the licensing of at least three primary dealers including that of Perpetual Treasuries a company owned by the family of the forrmer Governor Mahendran’s son in law.
The original application indicated that the company did not have adequate free capital as envisaged by the rules of the Central Bank of Sri Lanka
`Perpetual Treasuries did not have the adequate Rs 300 million of “free capital” and instead had resorted to raising debt to fullfil this requirement
The Forensic Audit astonishingly reveals that the team handling the application pointed out the deficiencies namely:
- 1. Prior
Experience of PTL group in financial services industry;
2. Risk of Standalone Primary Dealer in terms of Market Development, Market Integrity and Compliance towards the applicable Laws;
3. Issues noted in ESL, where the company misused the customer monies, high Related party transaction, high Staff incentives, no security allocation and non-recording of transaction in CDS; and
4. Infrastructure available with PTL for the development of Government Securities Market in rural areas of the Sri Lanka
It was reccomended that Perpetual Treasuries not be given the license as a dealership. This reccomendation was made On the 5th of December 2012 by the Supervusion Department of CBSL
In interviews with the Forensic Auditors Mr NWGRD Nannayakkara of the Public Debt Departmet at the CBSL stated that the appointment letter to Perpetual Treasuries was granted despite his reccomendation not aproving the application
Interestingly the Board paper submitted by Deputy Governor BDWA Silva did not include the relevant concerns raised by his colleagues and presumably not to the Monetary Board of the CBSL. The Forensic Audit does not mention why the relevant doubts and negative observations were apparently deleted from the Board paper prepared by Deputy Governor BDWA Silva.
