The Employees’ Provident Fund (EPF) welcomes the clarification made by Standard and Poor’s (S&P) that there was “no information of any specific incidences occurring” of “a potential conflict of interest” due to the Central Bank’s oversight of the EPF which is “a large investor in Sri Lankan banking stocks”.
In the clarification, S&P has also stated that they “expect the central bank to have mechanisms to limit this risk”.
In its investment decision making process, the EPF does not enjoy any advantage with privileged information from the Bank Supervision Department or any other Department, and only accesses publicly available information and research, which other investors too access, the Central Bank said. Hence, no conflict of interest or unfair practice arises in the EPF’s investment process, the Bank further said.
Further, in terms of Section 5(1) (e) of the EPF Act, the Monetary Board is empowered to invest the moneys of the Fund in such securities as it considers fit, and sell such securities as well. Hence, the EPF has clear authority to invest in the share market, including the banking and finance sector.
In this regard, the EPF state that it would be highly prejudicial to the EPF members, if the EPF, as the country’s biggest Fund, were to refrain from investing in the best performing sector in the Colombo Stock Exchange, namely, the banking and finance sector.
S&P Sri Lanka 20, a globally recognized index, which has been jointly developed by S and P Indices and Colombo Stock Exchange was officially launched yesterday.
The index is designed to assist the investor both home and abroad to gauge the performance of the Sri Lankan equity market and that include the largest 20 stocks by total market capitalization, listed on the Colombo Stock Exchange that meet minimum size, liquidity and financial viability threshold.