Compliance and Risk Management

The Compliance framework of the Stock Brokering industry is mainly governed by the rules and regulations imposed by the Securities and Exchange Commission of Sri Lanka, The Colombo Stock Exchange and the Central Bank of Sri Lanka. These rules and regulations have been articulated in such a way to safeguard the interests of all stakeholders.

CAL Securities, being a leading stock brokering company in the Colombo bourse, has been able to maintain highest standards of Compliance and Risk Management, while introducing advanced techniques in line with both local and international best practices.

The Company is backed by a fully operational business continuity plan which is hosted off site (Disaster Recovery Site) and is subject to periodic testing. This ensures continuity of our essential business processes and delivering best services to our clients at all times.

Risks faced by investors

Investors may be exposed to certain risks when transacting in the secondary market, such as;

Risk of price fluctuation: Prices of securities fluctuate, sometimes drastically. The price of a security may increase or decrease and may even become valueless.

Risk of low liquidity: Liquidity refers to the ability of market participants to buy and/or sell securities/contracts expeditiously at a competitive price and with minimal price difference. Generally, it is assumed that more the number of orders available in a market, the greater the liquidity. There may be a risk of lower liquidity in some securities as compared to active securities. As a result, an order may only be partially executed, not executed or may be executed with a relatively greater price difference. Under certain market conditions, it may be difficult or impossible to liquidate a position in the market at a reasonable price or at all, when there are no outstanding orders either on the buy side or the sell side, or if trading is halted in a security due to any action on account of unusual trading activity or for any other reason.

Risk of news announcements: Issuers make news announcements that may impact the price of the securities. These announcements may occur during trading, and may suddenly cause an unexpected positive or negative movement in the price of the security.

Risk of rumors: Rumors about companies at times float in the market through word of mouth, newspapers, websites, news agencies, etc. Investors should be wary of and should desist from acting on rumors.

System Risk: High volume trading will frequently occur shortly after the market opens and shortly before the market closes. Such high volumes may also occur at any point during the day. These may cause delays in execution or confirmation of orders. During periods of volatility, on account of market participants continuously modifying their order quantity or prices or placing fresh orders, there may be delays in order execution and its confirmation.

System/Network Congestion: As with any communication system, there exists a possibility of communication failure, system problems, slow or delayed response from system, trading halts, or any such other problem/glitch whereby it may not be possible to establish access to the trading system/network of the Exchange, which in turn may result in a delay in processing or not processing buy or sell orders either in part or full.

Risk of expiry of options to rights and warrants: An option applicant who neither sells the option nor exercises it prior to its expiration will lose the entire investment in the option. This risk reflects the nature of an option as a wasted asset which becomes worthless when it expires.

Online trading to minimize risk:

Once online trading is assigned to a client and he/she is given the opportunity to trade according to his/her preference. This fully eliminates the risk arising due to miscommunication between the stockbroker and the client. Further, this will help clients to gain more insight to invest in the equity market via Automated Trading system.

Safety of trades and payments:

All electronic trading communications are routed via secured and dedicated VPN tunnels between CSE and CAL which is designed with state of the art technology. The payment requests are also channeled through a session-based secure communication mechanism between the trading front end tool and the broker back office. CAL is committed to attaining the highest degree of broker ethics and has put in place stringent IT policies and non-disclosure agreements with all parties concerned.