In terms of Section 30 of the New Securities and Exchange Act No 19 of 2021, the Securities and Exchange Commission (SEC) is duly empowered after a consultation with the Colombo Stock Exchange (CSE), to direct the CSE to close its securities market (share market) for a period not exceeding five business days at a time which period is extendable. In order to do so the SEC should form an opinion that an orderly and fair market for trading in securities on the securities market is being or is likely to be prevented because of an emergency or natural disaster within Sri Lanka or if there exists an economic or financial crisis or any other similar circumstance within or outside Sri Lanka. “The Share market over the last week has seen wiping out of investments close to over 800 Billion Rupees. During the last month the wipe out should be close to about 1500 Billion Rupees. Such however cannot be attributed to failures of performance of the listed companies. The top tier companies have actually recorded exceptional performances and profits for over the last financial year. However, owing to the serious fuel and power crisis resulting in the public unrest, curfew the share trading last week cannot being construed to be in any be orderly and fair. This sentiment and uncertainty is bound to continue for a couple of weeks. Last week with over 10 hours of power cuts per day which overlapped trading hours, trading devices being unable to be charged for trading, failures internet connections and in addition the inability of share brokers to travel are some reasons which have all resulted in an unfair trading environment. Considering all this and now the prevailing state of emergency which was declared at the end of the week, it is nothing but reasonable to halt trading for at least a week. Though a contrary school of though exists that all of the above are part and parcel of the uncertainties of an equity market which should not warrant for closure of an exchange, the circumstance at the moment in Sri Lanka are beyond any reasonable acceptable level to any person resulting in also irrational thinking and haphazard decision making. In instances such as this, the closure of the exchange for a period, and reopening thereafter when a semblance of normalcy returns has generally resulted in some degree of stability and also the possibility of an upward trend. However, in the event of a further free fall of share prices stakeholders including financial institutes who have extended margin facilities on share securities could suffer irremediable harm causing further harm to the economy of the country.
