Colombo Stock Exchange is striving to demystify capital markets and broaden investor horizons

As tremors of the economic shockwaves caused by the Covid-19 pandemic continue to reverberate across the globe, economies and societies are awakening to the new world order created in its wake.

Many dreams and goals were lost over the past two years. While the loss will remain infinitely immeasurable it is now time to start looking forward, to dream bigger and reach further. The work of rebuilding lives, of re-laying the foundations of financial security and freedom for this generation and those that follow, must begin now. Garnering new perspectives and acquiring new skills and capabilities that will act as a buttress against future economic exigencies is the need of the hour.

Against this backdrop, the Colombo Stock Exchange (CSE) has further strengthened its efforts to enhance financial literacy in Sri Lanka, striving to demystify capital markets and broaden investor horizons while building transparency and trust as irrefutable pillars of the country’s financial markets. Through these efforts the CSE promotes good governance, transparency and accountability, empowering investors to make informed decisions in order to benefit from the opportunities offered by a robust financial environment.

Investor education is a key component of the overarching goal of investor protection - a goal in which regulatory bodies and financial institutions play a pivotal role. The CSE has implemented stringent rules relating to financial transparency and accountability that listed companies must strictly adhere to, which are closely monitored and regulated. Of particular note are recent amendments to the Securities and Exchange Commission (SEC) Act relating to illegal activity such as insider trading and market manipulation. The amendments broadened the ambit of legal action that can be taken, increasing punitive measures and extending the scope beyond criminal proceedings to include more expeditious civil proceedings.

Engaging online audiences

Sri Lanka’s capital market operates in a progressive and thriving environment that has consistently proven resilient to negative global economic developments. As world and regional markets face challenges from the economic fallout of the pandemic, Sri Lanka’s capital markets have demonstrated robustness with the CSE achieving its highest trading volumes on record.

Cognizant of a rapidly increasing number of active retail investors, and the need to sustain investor confidence, the CSE curates a variety of knowledge-sharing programmes aimed at educating investors on the importance of risk diversification and helping current and potential investors navigate the stock market with greater confidence.

These programmes continued uninterrupted during the series of lockdowns necessitated by the pandemic, seamlessly shifting to an online presence to engage audiences across the country, powered by the foresight of the joint committee initiative by the SEC and CSE to accelerate the digitalisation drive. The sessions cover a diverse array of initiatives and topics, including collaboration and knowledge sharing, current market trends and developments, education on relevant regulatory frameworks as well as formal certification programmes.

Among the programmes designed to enhance knowledge of current market trends and developments are a series of online forums and webinars conducted in collaboration with the Chartered Institute of Management Accountants (CIMA), which centered around recent tax reforms and offered advice on maximizing the benefits of accompanying concessions and exemptions. The Parliamentary presentation of the Budget, corporate governance best practices and enhancing knowledge of the stock market, have been among topics discussed at the forums. Other sessions addressed digital transformation and the listing of companies in the IT industry, and explored the opportunities created by the recently introduced Real Estate Investment Trusts (REITs) Framework.

The programmes were developed in collaboration with professional, educational, financial and technology institutions, which included the Information and Communication Technology Agency (ICTA), the Federation of Information Technology Industry Sri Lanka (FITIS) and the Institute of Chartered Accountants (CA) Sri Lanka.

In 2018, to acknowledge the benefit of a formal qualification in pursuing career development goals, the CSE launched its flagship Advanced Diploma in Financial Markets - a nine-month certified educational course which gives in-depth perspectives and understanding of financial market mechanisms.

A Memorandum of Understanding signed with the London Stock Exchange Group (LSEG) Academy enabled the CSE to further its efforts to promote financial literacy and capabilities among the corporate investor segment, including company directors, investment bankers, financial analysts, investor relation managers and PR managers of listed companies. Additional programmes focusing on corporate governance, accountability and transparency aim to foster an investment culture built on best practices, thereby ensuring investor confidence and protection.

Other collaborative ventures in this sphere include MOUs signed with peer stock exchanges to foster knowledge sharing and contribute to the development of capital markets. The recent MOUs with Pakistan Stock Exchange and the University of Canada West extended the Executive Programme and focus on training and skills development.

Leverage opportunities

Events such as the ‘Listed Company Feature Series’, organized by the CSE, Colombo Stock Brokers Association (CSBA) and ‘Investor Week’, act as a catalyst, creating key opportunities for engagement between representatives of listed companies and institutional investors.

Developing healthy financial habits among the younger generation is of paramount importance. A generation of savvy investors equipped with the knowledge to identify viable investment avenues and the tools to effectively leverage these opportunities will form the basis of sustainable financial stability. To this end, the CSE expends significant effort on building financial awareness among budding investors and the public in general, through countrywide educational and awareness programmes for commercial and public sector organizations, business associations, industry trade groups, universities and schools.

The explosive growth in financial technology (fintech) is revolutionizing financial markets, creating a more dynamic environment and more inclusive opportunities for participation in wealth building. Information can be gleaned and wealth can be created with the tap of a button. The CSE’s accelerated digitalisation drive has enhanced its presence and accessibility across a plethora of technological and social media platforms. The CSE website, trading platforms and mobile applications dispense real times news and investment information to a rapidly growing base of followers. An investment complaint portal also allows investors to lodge complaints against stockbroker firms and offers several avenues of redress.

The sophistication and available choice of investment and savings products, and the number of financial institutions vying for assets, are higher than ever before. Financial literacy must now go beyond offering knowledge of concepts and risks to imparting the necessary skills and confidence to leverage this knowledge effectively. Understanding and navigating through these choices can mean the difference between financial freedom and financial bondage.