Malik Cader
The stock exchange mafias first victim, former securities regulator Malik Cader
discusses the events that led to his resignation
At that time it was speculated that you were asked to leave immediately?
No. There were forces at work to see me ousted from the SEC. But I think Dr Jayasundera did
not like that. In fact, he told me that he did not like to see professionals treated this way.
Dr Jayasundera, SEC Chairperson Indrani Sugathadasa, and the members of the commission
were all on my side. But their support was not enough.
I think the then presidents mind was poisoned and several politicians also got on board the
anti-regulator bandwagon. Half the people who made those decisions against the SEC
arent well versed on capital markets or its regulation.
Was it not the finance minister who appointed you Director General of the SEC?
I was Deputy DG and Officer in Charge and for one year functioned as the acting Director
General. Six months after Ms Sugathadasa took over as Chairperson, the commission called for
applications to fill the DGs post. Since I was already performing this role, and since I had the
credentials and qualifications, I applied. I went through the whole selection process despite my
15 years at the SEC. The then Minister of Finance and President, appointed me on
the recommendation of the commission towards end 2010
When did you realise that all was not right at the Colombo Stock Exchange?
There was a surge with the All Share Price Index moving from 1,500 points to 7,800 points. Up
to a certain level, maybe 5,000 or 6,000 points, I saw the rise as a realisation of
underlying listed company valuations following a 30-year war. But when
fundamentally unsound companies were driving the market rise-some were trading at
1000 times their earning levels we felt the market was showing an artificial boom. We were
then also of the strong belief that stock prices were being manipulated. This was an unhealthy
situation.
But was there enough evidence to suggest this was the case when you examined
trading records?
We were getting ready for that. On the face of it there was enough evidence. We were getting
ready to move to the next level; unfortunately others felt that this was not the time.
Some thought the SEC was spooking the market by trying to investigate
irregularities then. Could you not have been discreet?
The market would eventually find out when we summon people for an inquiry.
small investors were making money without effort, not realising the risks. In fact Ms
Sugathadsa told a public forum of market intermediaries dont kill the goose that lays the
Golden Egg by grabbing all the eggs. Lets be patient and nurture the goose so that we will
have the produce every day .
But could the SEC have prevented this from happening in the first place?
We introduced a price band and placed restrictions on credit, which worked. Those on the other
side of the fence were against these restrictions, naturally, because these were impeding their
ability to manipulate share prices and other investors.
Critics claimed the price bands and other measures were ad hoc and that the SEC
under your watch was inconsistent, changing rules from time to time?
There was consistency. First came the price band and then the credit rules. Brokers must go to
margin providers and creditors must prove their credit worthiness. These measures worked.
When did
the pressures start and where did it come from?
When we started summoning the accused for questioning. We got signals asking us to go slow,
postpone the investigation or questioning of so-and-so. It came from the top, from outside the
commission. It was mostly phone calls. Also, there were newspaper articles and forums aimed
at destabilizing the SEC.
Werent the stock trading records analysed by the SEC? Wasnt there hard
evidence to prove them wrong?
These are criminal matters that have to be proved beyond any reasonable doubt and we were in
the process of gathering evidence. Unfortunately, we couldnt proceed.
adopted price bands and credit restrictions earlier. In fact, had we resorted to taking people to
courts nothing would have happened for several years and share price manipulation would have
continued.
Were all the SECs then commissioners on board. Were there commissioners who
were pulling in a different direction?
People had differences of opinion. We had debates and arguments but on general consensus
commissioners were behind us.
Was there anyone among your colleagues who tried to pull the carpet from under your feet?
No. Even if they wanted to they could not because the commission was with me.
After you left,
some SEC
officials were
suggesting there
were no grounds
to continue
investigating any
one?
Not in my time. We worked together although we had our differences. Some argued that we
must be merit-based, but we suggested that the market should be disclosure-based. We
debated on whether certain people should be investigated or not, but ultimately there was
consensus.
There were accusations that you were close to the Browns group and
separately, involved in a hotel project in Passikudah?
I had nothing to do with either of these. My father-in-law is an architect and undertakes work of
which I have no control. That is his Job. He is a respected senior architect who designed several
high rises in Colombo. He designed and built a property in Passikudah. After I left
government I accompanied him on his visits. It was just an excuse used to attack me. All this
appeared in websites.
cordial and professional relationship. She always wanted nothing short of the right thing done.
Her integrity, commitment, dedication and patriotism is unsurpassed. If we have a couple
of people like this in strategic positions in the bureaucracy this country would be a better place
than it is now.