The Colombo Stock Exchange (CSE) renamed its ‘Default Board’ as the ‘Watch List’ with effect from January 2018. This move was made in a bid to conform to new enforcement procedures of the CSE’s listing rules – primarily in relation to three categories of corporate indiscretions.
These categories include the following: violation of corporate governance requirements; late submission or non-submission of interim financial statements or annual reports; and modified audit opinions or an ‘emphasis of matter’ (regarding going concern) in audited financial statements.
Twenty percent of the entities listed on the Colombo bourse – or 60 public companies, to be precise – are on the list of offenders with respect to the exceptions noted above. In addition, some quoted companies have been identified as such for multiple violations.
In financial year 2018/2019, the number of corporate governance violations dec reased to 28 (from 38 in 2017/18). In stark contrast
however, the late submission of interim financial statements or annual reports surged from 11 in the previous year to 20 in the period under review, which flies in the face of corporate discipline and conformity.
Furthermore, the number of instances relating to modified audit opinions on listed company financials increased to 12 in 2018/19 compared to nine in the preceding financial year.
So has there been an improvement in listed companies conforming to the new enforcement procedures? As far as the Colombo Stock Exchange’s listing rules go, the short and not so sweet answer is ‘no.’