Sri Lanka Contemplates Independent Research


Sri Lanka’s Securities and Exchange Commission issued a concept release outlining plans to fund independent research and to grade initial public offerings through a rating agency.

The SEC said it was considering adopting an independent equity research program aimed at providing “unbiased research reports, with in-depth analysis of the fundamentals and valuations of listed companies to encourage informed investment decision making.” SEC said such programs are typically paid for through the stock exchange or a market development funds and are found in India, Singapore, Malaysia, Indonesia, Australia and the United States.

It is also proposing to encourage a rating agency for IPOs.  “The purpose of rating/grading equities is equities is to provide the potential retail or institutional investor with an independent view on the fundamentals and prospects of the company seeking a listing…,” the SEC said in a consultation paper.  “The IPO grade represents a relative assessment of the fundamentals of that issue in relation to other listed equities.

“It is generally assigned on a five-point scale with a higher score indicating fundamentals and vice versa.”  IPO grade one would have poor fundamentals; and at IPO grade five, strong fundamentals.


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