Good governance activist Chandra Jayaratne has requested the Securities and Exchange Commission of Sri Lanka (SECSL) to inform all stakeholders of the society concerning Securities Rules and Regulations and the effective enforcement processes applicable when dealing with Mergers and Acquisitions that give rise to the concentration of economic power and market control opportunities.
Jayarathne who was also the former Chairman of the Ceylon Chamber of Commerce, in a letter to the SECSL on Thursday (17) has pointed out that the concentration of economic and market control power in the hands of a few can result in detrimental impacts on consumer interests and business.
He has also pointed out that due to the inevitable likelihood of such concentration of economic and market control power among a handful that would lead to anticompetitive practices (arising from the need to obtain and maintain control) can negatively impact the growth and prosperity of the country in the longer term .
In his letter therefore, he has suggest the present situation deems it essential that the following steps be adopted in order to ensure effective market operation and growth.
We publish below the letter in full;
Officer-in-Charge / Deputy Director General,
Securities and Exchange Commission of Sri Lanka,
Level 28 and 29, East Tower, World Trade Centre,
Securities Regulations to Control Mergers and Acquisitions
I am sure you will no doubt agree, that the concentration of economic and market control power in the hands of a few, is likely to injure the interests of consumers and businesses and negatively impact on the growth and prosperity of the nation and its people in the longer term, due to the inherent likelihood of such concentration leading to anticompetitive practices in an effort to obtain and maintain control. Such fears have resulted in appropriate Securities Regulations being enacted and enforced with effectiveness, to combat the likely anticompetitive practices, diminished free market opportunities and limits placed thereby on individual initiative.
It could therefore be deemed essential for effective market operation and growth and prosperity of nations and people that “Concentration” arising from
- The mergers of two or more previously independent undertakings;
- The acquisition of direct or indirect control ( whether by purchase of securities or assets, by contract or otherwise) of the whole or parts of one or more other undertakings; or
- The establishment of a joint venture involving the acquisition of joint control of a full function joint venture undertaking
where “Control” ( both ‘sole control’ or ‘joint control’ in cohort with other undertakings, where the control arises from the joint initiatives of the separate undertakings in exercising decisive control) is exercised by rights, contracts or any other means, which either separately or in combination, confer the possibility of exercising decisive influence over an undertaking by a party acquiring the ability to determine an undertaking’s commercial strategy, irrespective of whether such acquisition allows majority or minority control by way of shareholding, but provides by way of the size of such shareholding, associated veto rights, rights of control over board appointments, other rights granted to shareholders explicitly or otherwise, empowering such a party to get adopted or block strategic commercial decisions including approval of annual budgets or business plans and appointments of key management are regulated and effectively controlled by a duly empowered regulator.
I would, in recognition of the foregoing submission, be most grateful if you will kindly arrange, by way of a public media announcement, to inform all stakeholders of society, of the Securities Rules and Regulations applicable and the effective enforcement processes in place within the Securities and Exchange Commission, in dealing with Mergers and Acquisitions that give rise to the concentration of economic power and market control opportunities.
If no such regulations and enforcement processes are in place at present, kindly explain
- The rationale for such a lacunae to be allowed to remain within the regulatory regime, and
- What strategic steps are being planned by the Government and the relevant authorities in order to remedy such an unacceptable situation.
I look forward to early response action by you and your colleagues in the Securities Exchange Commission.
cc. Secretary to H.E. the President,
Secretary to the Treasury,
Secretary Ministry of Economic Development,
Secretary Ministry of Cooperatives and Internal Trade,
Secretary Ministry of Industry & Commerce,
Governor of the Central Bank,
Chairman, Securities Exchange Commission,
Secretary General, Ceylon Chamber of Commerce,
Chief Executive Officers of the Institute of Chartered Accountants/CIMA/ CFA/ Institute of
Directors/OPA/Economic Association/Transparency International
Editors of Financial Sections of Media Institutions