Minimum Shareholder Fund Requirement for Stock Brokers

SEC Sri Lanka Circulars

Published February 3rd, 2017

Detected March 27th, 2026

Summary

The Securities and Exchange Commission of Sri Lanka has issued a directive mandating all licensed stock brokers and stock dealer firms to maintain a minimum shareholder's fund requirement of Rs. 100 million or 50% of the firm's stated capital, whichever is higher. This directive aims to strengthen the financial position of these firms and uplift market standards.

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What changed

The Securities and Exchange Commission of Sri Lanka (SEC) has issued a directive, effective January 1, 2018, requiring all licensed stock brokers and stock dealer firms trading in equity and/or debt securities to maintain a minimum shareholder's fund of Rs. 100 million or 50% of their stated capital, whichever is greater. This new requirement is intended to bolster the financial stability of these entities and enhance overall market standards. Licensed Stock Brokers and Stock Dealers who are also Primary Dealers regulated by the Central Bank of Sri Lanka are exempt from this directive.

Stock broker firms must ensure they meet this new capital requirement by January 1, 2018. The Colombo Stock Exchange (CSE) is directed to inform all relevant firms, incorporate this requirement into the CSE Stockbroker Rules, and develop an enforcement mechanism for non-compliance, to be submitted to the SEC for approval. Compliance officers should review their firm's current capital position and plan for any necessary adjustments to meet the new threshold by the effective date.

What to do next

Ensure firm meets minimum shareholder's fund requirement of Rs. 100 million or 50% of stated capital by January 1, 2018.
Review firm's capital position and implement necessary adjustments.
Monitor CSE Stockbroker Rules for incorporation of this directive.

Source document (simplified)

SEC logo

SECURITIES AND EXCHANGE COMMISSION OF SRI LANKA

Sri Lanka state emblem

ශ්‍රී ලංකා ආදායම් මණ්ඩලය සහ විකිණුම් කොමිෂන් සභාව இலங்கைப் பிணையங்கள் மற்றும் பரிவர்த்தனை ஆணைக்குழு

BY HAND

Ref: SEC/LEG/17/02/06

3rd February 2017

To: The Colombo Stock Exchange and all licensed Stock Brokers and/or Stock Dealer Firms trading in equity and/or debt securities

DIRECTIVE ISSUED IN TERMS OF SECTION 13 (c) AND SECTION 13 (p) OF THE SECURITIES AND EXCHANGE COMMISSION OF SRI LANKA ACT NO. 36 OF 1987 (AS AMENDED)

RE: THE ADOPTION OF RULES MANDATING STOCK BROKER AND/OR STOCK DEALER FIRMS TRADING IN EQUITY AND/OR DEBT SECURITIES TO MAINTAIN A MINIMUM SHAREHOLDER'S FUND REQUIREMENT

The Securities and Exchange Commission of Sri Lanka (SEC) at its 381st Meeting held on 10th January 2017 having deliberated upon the several measures taken as at date to protect the interests of the clients of Stock Brokers and Stock Dealers decided to mandate all licensed Stock Brokers and Stock Dealers trading in equity and/or debt securities to fulfil and maintain a minimum requirement of shareholder funds to strengthen the financial position of such Brokers and Dealers irrespective of losses sustained in the past as part of a risk assessment framework.

It was also the view of the Commission that mandating a minimum shareholder's fund requirement will uplift the standards of Stock Brokers and Stock Dealers and equip them better to play a greater role in the development of the market.

Therefore all licensed Stock Broker and/or Stock Dealer firms trading in equity and/or debt securities are hereby directed as follows:

to maintain a minimum shareholder's fund requirement of Rs. 100 million or 50% of the firm's Stated Capital, whichever is higher.

Licensed Stock Brokers and Stock Dealers who are also Primary Dealers regulated by the Central Bank of Sri Lanka (CBSL) are exempted from the application of this Directive.

The Colombo Stock Exchange (CSE) is hereby directed:

i. to inform all Stock Brokers and Stock Dealers of this Directive;

Handwritten signature and date 06/02

RECEIVED stamp dated 07 FEB 2017 with handwritten page number 1 of 2

28 සහ 29 මහල, වාණිජ්‍ය කුළුණ ලෝක වෙළඳ මධ්‍යස්ථානය එච්එන් වර්ගය, කොළඹ 01.

දුරකථන / தொலைபேசி / Telephone: +94 11 2439144-8, +94 11 2331013-5

28 மற்றும் 29 ஆம் மாடி, உலக வர்த்தக மையம் கிழக்கு கோபுரம், எச்எல்என் சதுக்கம் கொழும்பு 01.

ෆැක්ස් / தொலைநகல் / Fax: +94 11 2439149

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Echelon Square, Colombo 01, Sri Lanka.

වෙබ් අඩවිය / இணையம் / Website: www.sec.gov.lk, www.cmet.sec.gov.lk, www.cmic.sec.gov.lk

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ii. to take steps to incorporate the above mentioned requirement to the Stockbroker Rules of the CSE to be effective from 01st January 2018; and
iii. to develop a suitable enforcement mechanism in the event of non-compliance with this requirement and submit same for the approval of the SEC.

This Directive shall be effective from 01st January 2018.

Vajira Wijegunawardane

DIRECTOR GENERAL