|
|
TFC breaks laws, but CB uses EPF to buy more of its shares!
Friday, 14 September 2012 - 11:10 AM SL Time
 Share On Facebook
|
|
|
Amidst a number of questionable investments in the Colombo Stock Exchange, the Employee s Provident Fund (EPF) has been used by the Central Bank to invest in shares of The Finance Company PLC (TFC) which was found violating Central Bank directives and the financial laws of the country.
As at the financial year ended March 31, 2011, the EPF held a 7.44 stake in TFC with 4,497,600 shares. That year, TFC reported a loss of Rs. 3,682.8 million.
A year later, as at March 31, 2012, the Central Bank bought 593,600 more TFC shares taking the total EPF holding to 5,091,200, increasing the stake to 8.43 percent.
Although TFC s losses fell sharply to Rs. 353.4 million, during the one year period, TFC had been found violating a series of laws under the Finance Business Act and several Central Bank directives as well. (see yesterday s The Island Financial Review).Despite this, the Central Bank saw fit to invest public funds in acquiring more than half a million shares.
The audit committee reports said there was serious doubt in TFC s ability to continue as a going concern.
`The Central Bank is responsible for maintaining financial system stability, this maybe why such an investment was made in TFC because it had to shore up public confidence. But by using hard earned monies lying in the EPF, the authorities are effectively punishing the people for the sins of others, sins being bad management,` an analyst said.
The Central Bank is yet submit to a detailed EPF share investment portfolio to Parliament, a matter constantly taken up by UNP MP Dr. Harsha De Silva.
A previously published list of EPF investments in the stock exchange shows many so called speculative and junk stocks, such as TFC.
The Central Bank consistently maintains that EPF funds are invested in sound stocks with the purpose of giving EPF members better returns.
`Leaving share market boom and busts aside, professional equity fund management dictates that fundamentally sound counters will always be a better bet in the long term. In the case of TFC, public funds are being used to invest in a loss making company. If it is bad for the National Savings Bank to buy TFC shares, why is the Central Bank still holding on to them, or rather why did it invest in the first place? Did it know that TFC was violating its own directives and the laws of land?` an analyst asked.
`Did the Central Bank know the loss making TFC was flouting its directives and the country s laws? Yes or nor, either answer is very, very, disturbing,` he said.
|
|
|
|
Search All News and Discussions