Written by Tharushan Fernando
23 May, 2015 | 7:15 am
The Financial Crimes Investigations Division, or FCID, has begun inquiries into the controversial share transaction, where stocks of Lanka Hospitals PLC, were sold to an Indian company.
The police stated that the FCID, summoned Colombo-based businessman Dilith Jayaweera, to provide a statement on a controversial share transaction involving Lanka Hospitals PLC. Following which on March 4, 2011, Fortis Global Healthcare acquired a 28.6 per cent stake in Lanka Hospitals Corporation, for Rs.3.9 billion.
Leading up to this transaction, there was a significant spike in volumes indicative of a group accumulating shares at a price of around Rs.40. However, two days after, Fortis Global Healthcare announced that it had acquired a 28.6 percent stake in Lanka Hospitals, the stock price stood at Rs.52. On August 5, 2011, the share price of Lanka Hospitals was 37 rupees and 50 cents.
Incidentally, twelve days later, on August 17 the share price had skyrocketed to Rs.104 an increase of 177 percent.
Subsequently, after four years, on Thursday the share price of Lanka hospitals traded at Rs. 41. The unusual spike in the share price of Lanka Hospital four months after the Fortis deal, raised several questions.
According to section 32 of the Securities and Exchange Commission Act – Insider dealing is defined as; Trading in the shares of a Listed Company whilst in the possession of unpublished, price sensitive information in respect of the securities of the said Company, with a view to the making of a profit, or the avoidance of a loss.
SEC rules 12 and 13, define Market Manipulation or the Creation of a False Market as; Creation of a false or misleading appearance or impression in respect of the trading, market or price.
SEC Rule 14 defines front running as; Trading directly or indirectly in securities of a Company ahead of a significant purchase or sale of securities of that Company, for his client, with the intent to profit by trading in such securities thereafter.
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