Regulatory Alerts2017-01-18
SEC Sri Lanka Directive Prohibiting Related Party Transactions for Swarnamahal Financial Services PLC
The Securities and Exchange Commission of Sri Lanka issued a directive to Swarnamahal Financial Services PLC prohibiting all related party transactions and debt write-offs until corporate governance rules are met. This action addresses the company's repeated non-compliance with Listing Rules, extensive unregulated related party dealings, and a negative net asset value exceeding Rs. 1 billion. The prohibition remains effective until the company demonstrates compliance with Rules 7.10.2(a), 7.10.5(a), and 7.10.6(a) of the Colombo Stock Exchange Listing Rules.
SEC SECURITIES AND EXCHANGE COMMISSION OF SRI LANKA ශ්රී ලංකා සුරැකුම්පත් හා විනිමය කොමිෂන් සභාව இலங்கை பிணையங்கள் மற்றும் பரிவர்த்தனை ஆணைக்குழு
Office of the Director General
BY HAND/REGISTERED POST
18th January 2017
Ref: SEC/LEG/17/01/12
To : Swarnamahal Financial Services PLC
Re : Directive issued in terms of Section 13 (cc) of the Securities and Exchange Commission of Sri Lanka Act No.36 of 1987 (as amended)
The Securities and Exchange Commission of Sri Lanka (SEC) at its 381st meeting held on 10th January 2017 deliberated upon several matters concerning Swarnamahal Financial Services PLC (SFS) including the following:
a) repeated non compliance with mandatory Corporate Governance Requirements in terms of Rules 7.10.2(a), 7.10.5(a) and 7.10.6(a) of the Listing Rules of the Colombo Stock Exchange (CSE); b) extensive related party transactions without required checks and balances; c) the negative impact on the interests of investors due to the above mentioned non compliance; d) a Negative Net Asset Value over Rs. 1 billion, indicating a dire financial status; and e) significant issues relating to going concern status and the company's inability to infuse capital as of date despite regulatory requirements of the Central Bank of Sri Lanka (CBSL).
In light of the above significant issues and in the interest of investors, the Commission decided to issue a directive to SFS prohibiting it from entering into any Related Party Transactions including any write-off of outstanding or making of adjustments which will reduce the outstanding balances (except by way of recovering outstanding debt from Related Party Transactions) until such time the Corporate Governance Requirements of the Listing Rules of the Colombo Stock Exchange are complied with.
Therefore, the company is hereby directed to comply with the above mentioned prohibition.
This directive shall be effective from the date hereof until compliance by Swarnamahal Financial Services PLC with Rules 7.10.2(a), 7.10.5(a) and 7.10.6(a) of the Listing Rules of the CSE.
[Signature] Vajira Wijegunawardane DIRECTOR GENERAL AA/EW
Copy to: Mr. Rajeeva Bandaranayake, Chief Executive Officer, Colombo Stock Exchange
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