As at 3 March, the Securities and Exchange Commission of Sri Lanka finds itself at the centre of an unusually public reckoning over the breadth of its enforcement authority under the new SEC Act, with senior jurists warning that credibility in capital markets cannot come at the expense of constitutional guarantees.
The debate unfolded at the Bar Association of Sri Lanka (BASL) National Capital Market Symposium on 26 February at Cinnamon Life at City of Dreams, where two expert panels dissected insider dealing, market manipulation, and the regulator’s expanded investigative reach.
Former SEC Director (Legal and Enforcement) Ayanthi Abeyawickrama defended visible, firm enforcement as essential to investor confidence. “The regulator’s duty is to preserve confidence and ensure orderly markets,” she said, framing deterrence as a systemic necessity in a market still rebuilding depth and participation.
But Heritage Partners Senior Partner Dr. Arittha Wikramanayake delivered a pointed counter: “Presumption of innocence is not optional.” His concern centred on statutory presumptions within the new law that may, in practice, shift the evidential burden onto accused parties a significant departure from traditional criminal law safeguards.
One flashpoint was the publication of names at the show-cause stage. Under current practice, entities under investigation may face public disclosure before final adjudication. Wikramanayake argued that such publicity can inflict immediate commercial and reputational harm during investigations that often span years. “Publication at the show-cause stage can function as punishment before adjudication,” he warned.
Harsha Amarasekera, PC, analysing insider dealing provisions, noted that liability now turns on possession of unpublished price-sensitive information rather than fiduciary status. “The perimeter is clearly broader,” he observed, underscoring that expanded exposure requires disciplined application of presumptions and investigative tools.
Former Supreme Court Justice Buwaneka Aluwihare, PC, reinforced that statutory presumptions “cannot displace fundamental criminal law principles,” signalling judicial unease over the balance between efficiency and fairness.
Panellists also scrutinised institutional design. Investigations are conducted under the Commission’s authority, findings evaluated internally, and enforcement determinations made by the same body. “We cannot allow a system where the same institution effectively investigates, determines, and enforces without robust procedural safeguards,” Wikramanayake cautioned.
Concerns extend beyond doctrine to capacity. Reported vacancies at the Commission estimated at around 50 positions raise questions about whether the regulator possesses sufficient technological expertise and commercial depth to apply sophisticated insider trading and manipulation provisions consistently.
The debate sharpened around the Act’s compounding powers, which allow administrative settlement of offences through financial penalties linked to benefit gained or loss avoided. While efficient in theory, significant monetary consequences may create strong inducements to settle. Where penalties are substantial, Wikramanayake warned, proportionality and procedural clarity become paramount.
Speakers were careful to distinguish between statute and stewardship. “I do not fault the statute,” Wikramanayake concluded. “The Act provides the tools. The question is whether the institution has the capacity to apply them in complex commercial environments.”
As enforcement activity intensifies, the central tension remains clear: market confidence depends on firmness but its durability may ultimately rest on fairness.
