The pending demutualisation process of the Colombo Stock Exchange (CSE) appears to be stuck in a quagmire as the members of the CSE continue to await a response from the Ministry of Finance and the Securities and Exchange Commission of Sri Lanka (SEC) on the proposals/suggestions made by them about the Demutualisation Bill.

Speaking to The Sunday Morning Business, CSE Chairman and First Capital Holdings Managing Director/Chief Executive Officer (CEO) Dilshan Wirasekara stated that 15 members of the CSE had submitted their proposals/suggestions regarding the Demutualisation Bill and that they were yet to receive any response from the Ministry of Finance and the SEC.

Elaborating further, he said: “Speaking not as the CSE Chairman, but as the Managing Director of one of the trading members, I hereby state that the trading members have submitted their suggestions for the Demutualisation Bill. We have not heard anything back thereafter. We are unaware of the current status of the process.”

Wirasekara pointed out that a Demutualisation Bill had been drafted in 2018, although it had not been presented to Parliament. Thereafter, the members of the CSE had obtained the advice of the International Finance Corporation (IFC) on the appropriate post-demutualisation governance structures and had accordingly suggested that certain changes be made to the Demutualisation Bill. 

“We engaged the IFC and they looked at that bill and suggested certain amendments in terms of governance. We felt there were certain inadequacies in what the Government was trying to present, so we obtained the services of the IFC as a consultant and gave those recommendations to the Government. What the Government plans to do with them or how or whether it will incorporate them is something I do not have oversight on,” he said.

He further stated that the market was seeking a post-demutualisation share allocation of 70% for the members and 30% for the Government, whereas the 2018 Demutualisation Bill had proposed a 60:40 share allocation.

Wirasekara further explained that the CSE was a mutual exchange which was incorporated as a company limited by guarantee and was owned by the 15 founding stock broking houses. 

Therefore, he noted that the best course of action would be for the Government to implement the demutualisation process of the CSE with the agreement of the members. However, although he conceded that the Government could pass the Demutualisation Bill without the consent of CSE members, he pointed out that such a course of action would amount to appropriation.