The Colombo Stock Exchange (CSE) is a company established under the Companies Act No.17 of 1982. It is licensed by the Securities & Exchange Commission of Sri Lanka and is the only authorized Stock Exchange in Sri Lanka.
The Board of Directors is the main policymaking body of the Exchange. The Board appoints sub-committees and delegates power to formulate recommendations on day-to-day operations. The sub-committees are Capital Issues, Rules & By-Laws, Disciplinary & Arbitration, Research & Development, Finance and Listings.
The Central Depository System (CDS) is a wholly owned subsidiary of the Colombo Stock Exchange (CSE) and is in charge of clearing, settlement and registration.
Its functions are fully automated and act as a depository to hold shares in trust for shareholders of listed companies. Twenty eight stockbroking firms and 16 commercial banks provide custodial services for investors.
Custodian Banks have been granted participatory status, enabling them to utilize facilities and services offered by the CDS directly.
As a participant, the custodian maintains all securities with the CDS in the client’s name. Most custodian banks have tie-line facilities to the depository, enabling real-time information on their client’s share portfolios.
All physical scrips must be lodged with the Central Depository System prior to trading. The Central Depository System updates its records and dispatches the scrips to the respective company secretaries by the next working day. The Central Depository System maintains all securities accounts. Shareholders receive a statement of their holdings at the end of each month. Custodian banks receive a statement of holdings of their clients on a weekly basis.
In September 1987, the government established the SEC, a statutory body responsible for regulating capital markets, including the stock market. The Commission’s role is to protect the interests of investors, to promote professional standards and to advise the government on the development of capital markets.
The SEC regulates and governs the CSE. The body has the authority to determine requirements for new listings and the power to investigate misconduct in the market and to refer cases to the Attorney General for prosecution.
The 1987 Securities and Exchange Commission Act, which set up the regulatory body, is the main legislation affecting the stock market.