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Do you see Corruption here - Mr. Wijemanne is a director of TFC and also Taprobane Securities, the broker for NSB. the other three sellers at Rs. 50 a share were ABC Radio chief Raynor Silva, motor car dealer, Yoga Perera and

Monday, 7 May 2012 - 5:41 AM SL Time

Insider deal suspected in NSB`s purchase of TFC shares
Multimillion-rupee share transaction

A staggering Rs. 390 million stock market transaction by the state-owned National Savings Bank (NSB) has triggered a major row, forcing both President Mahinda Rajapaksa and the Treasury to intervene.
This is while the Securities and Exchange Commission (SEC) has launched its own investigation into some alleged irregularities.

The deal involves a 13 per cent stake of The Finance Company (TFC) being bought by the NSB on April 27 at around Rs. 50 a share. This was through four separate transactions involving two TFC directors and NSB Chairman Pradeep Kariyawasam, when the share market price was hovering around mere Rs 30-31 a share. The SEC is probing the deal.

Dinal Wijemanne, one of those involved in selling 2.9 million shares at Rs 50 to NSB, was among those questioned by SEC in the past two days. The SEC also called the brokers involved in the transaction to ascertain the facts behind the deal, a source close to the investigation said. The SEC, among other matters, is looking at whether there was any insider trading involved.

Mr. Wijemanne is a director of TFC and also Taprobane Securities, the broker for NSB. The Sunday Times learns that the other three sellers at Rs. 50 a share were ABC Radio chief Raynor Silva, motor car dealer, Yoga Perera and another who has been identified only as a Mr. Perera.

An investigation by the Sunday Times revealed that NSB Chairman Kariyawasam was involved in the decision to purchase the TFC stock and had requested the bank`s investment committee to support his decision. Investment committees in banks were set up following guidelines introduced by the Central Bank to ensure good governance. Mr. Kariyawasam was not available for comment.

The TFC share this week was trading in the range of Rs. 30 to 31. A senior official of the NSB, it has come to light, is unhappy with the Chairman`s move and has complained to Treasury Secretary P.B. Jayasundera. The matter was later discussed with President Rajapaksa.

The four sellers, it is also learnt, have already been settled their dues, and the share transfer had taken place. Sampath Bank, one of the settlement banks at the CSE, has paid the Rs. 390 million to the sellers, though NSB is yet to settle this amount. Settlement banks act as guarantors for payment of trades.

When trade unions at the NSB complained to the top management about the transaction, they were told that the bank had to look for new investment avenues because there were few other investment options available.

While 60 per cent of the NSB investments go into Treasury Bills and government bonds, another 10-20 per cent goes into housing loans` transactions. There is also provision to invest in the stock market, but trade union officials say that such investment should be in blue chip companies that are doing well, not others.

The TFC was revived by the Central Bank after the crash of its parent, the Ceylinco Group, and later taken over by a group of investors. The finance company is on the path to recovery but is yet to settle some earlier depositors who have requested their monies back after the Ceylinco crash.

NSB trade union officials said they were told that the TFC investment was under a new strategy called corporate entrepreneurship. Whatever it might be, bank money (and also public money) should not be invested in risky ventures, one official said.

The opposition has raised concerns over the increasing use of EPF funds in the stock market, the increasing state control of local commercial banks, and investments by state banks in the stock market. The NSB issue is expected to figure in Parliament next week, with questions being raised by opposition legislators including economist Harsha de Silva.While the SEC has no role as far as buying a stock far above its market price is concerned as it`s the individual`s choice, the Commission can ascertain whether any rules were violated in the transaction. There are reports that one of the brokers on behalf of the sellers had offered two board seats to the buyer, one source said. Such decisions are usually taken by the board of directors of a company and not individual directors.

Non-involved brokers and traders said the deal had created credibility and confidence issues in the market, since initially the NSB refused to honour the deal, after it went through. Rightly or wrongly, when shares are transferred, the seller must be paid within the prescribed period (3-4 days), one broker said.

There is also provision to invest in the stock market, but trade union officials say that such investment should be in blue chip companies that are doing well, not others. The TFC was revived by the Central Bank after the crash of its parent, the Ceylinco Group, and later taken over by a group of investors. The finance company is on the path to recovery but is yet to settle some earlier depositors who have requested their monies back after the Ceylinco crash.

NSB trade union officials said they were told that the TFC investment was under a new strategy called corporate entrepreneurship. Whatever it might be, bank money (and also public money) should not be invested in risky ventures, one official said.

The opposition has raised concerns over the increasing use of EPF funds in the stock market, the increasing state control of local commercial banks, and investments by state banks in the stock market. The NSB issue is expected to figure in parliament next week, with questions being raised by opposition legislators including economist Harsha deSilva.While the SEC has no role as far as buying a stock far above its market price is concerned as it`s the individual`s choice, the Commission can ascertain whether any rules were violated in the transaction. There are reports that one of the brokers on behalf of the sellers had offered two board seats to the buyer, one source said. Such decisions are usually taken by the board of directors of a company and not individual directors.

Non-involved brokers and traders said the deal had created credibility and confidence issues in the market, since initially the NSB refused to honour the deal, after it went through. Rightly or wrongly, when shares are transferred, the seller must be paid within the prescribed period (3-4 days), one broker said.

Source(s)
Sunday times.

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AnuD
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LK Information  6 May 2012 22:46:58 GMT  Report for Abuse  
Bankrupt Finance Company director also was the owner/director of a Brokerage company.

He just got good share prices for it's clients at the expense of the NSB money.

Now, what ever stupid things they did, what ever thefts they did all covered with the govt money.

Share holders of the bankrupt company got premium prices for selling their shares.

What a deal !

I think some fraction of this money certainly should have gone to the NSB chairman too.
MoneyTalks
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LK Information  6 May 2012 22:59:53 GMT  Report for Abuse  
AnuD,

I afraid that, your Main Thread's Comment is wrong.
Please refer to following :

Rs 5000 Million = Rs. 5000 x 10^6 = $ (5000/120) x 10^6
= $ 41.7 x 10^6 = Approximately 42 Million US $ = 1 M US $ per kiloMeter.

I am not allowed to comment on Main Thread and that is the reason why, I posted it here.
AnuD
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LK Information  6 May 2012 23:02:21 GMT  Report for Abuse  
Thank you Money Talks.

So it is $ 1.2 million per kilometer

Yet, at that itme dollar was Rs 112 or less.
Edited By - AnuD - 6 May 2012 23:04:43 GMT
AnuD
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LK Information  6 May 2012 23:13:16 GMT  Report for Abuse  
Under proper conditions, NSB should have massed millions of shares when those were cheaper.

They should pay a premium price only when they buy the whole company and not only for buying 13% of the company.

In an hostile take over they may pay extra cash for shares in order to make the share holders happy.

In this case, they have bought only 13% share of the company.

Why did they pay extra ?
Roshan2007
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LK Information  7 May 2012 03:50:49 GMT  Report for Abuse  
We should not allow these government banks to do any of these dealings since all are corrupt to core.
poppy09
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LK Information  7 May 2012 03:52:58 GMT  Report for Abuse  
Wow! AnuD studying Investments & Financing at night school now? :)
poppy09
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LK Information  7 May 2012 05:17:46 GMT  Report for Abuse  
The renovation work cost of Rs.5,000 million.



Approximately $ 50 billion for 41 Kms.

One Kilo Meter cost more than One Billion Dollars.

puh! mara ganan kirimak ne :)
LOL
first learn arithmatic then you mght be able to comprehend investments and finances after a while.
Not that I am condoning the NSB transaction but I am more amused with your thinking :)
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