SEC Sri Lanka Eases Minimum Public Holding Rules for Listings via Introductions to Boost Market Flexibility

The Securities and Exchange Commission of Sri Lanka (SEC) has sanctioned amendments to the Colombo Stock Exchange (CSE) Listing Rules, aiming to offer greater flexibility concerning the Minimum Public Holding (MPH) requirement for companies opting to list through the Introduction method.

These revisions were proposed and reviewed under Project 6 – New Listings (Public and Private), one of 12 strategic initiatives launched by the SEC to enhance Sri Lanka’s capital market framework. Project 6 focuses on driving national capital formation, promoting listings by emphasizing benefits and opportunities for listed entities, and attracting large-scale corporations to boost market depth, liquidity, and investor confidence.

The amendments represent a collaborative effort between the SEC and CSE, highlighting the strong partnership between the regulator and the Exchange to address evolving market demands while ensuring market integrity, transparency, and investor protection.

The key features of the amendments to the CSE Listing Rules are as follows:

• Entities seeking a listing by way of an Introduction on the Main Board or Diri Savi Board that cannot meet the MPH requirement at the time of submitting the initial listing application may now be granted a listing, subject to certain compliance conditions.
• Non-public shareholders who have held their shares for at least eighteen months prior to the initial listing application date may divest up to 2% of their shares each month during the six months following the date of listing. They will also be subject to a lock-in requirement of 30% of their respective shareholdings as of the listing date, until MPH compliance or 18 months from the date of listing, whichever comes first.
• A phased MPH compliance framework has been introduced, requiring a minimum of 50% compliance with the MPH requirement within 12 months and full compliance within 18 months from the date of listing.
• Entities must include clear disclosures in the Introductory Document confirming their obligation to meet MPH requirements within the specified timelines.
• In cases of non-compliance with the MPH requirement, specific enforcement actions have also been introduced.

The revised framework is anticipated to encourage more companies to consider listing via Introduction, thereby broadening market participation, enhancing liquidity, and contributing to the overall development of Sri Lanka’s capital market. Issuers, investors, and market intermediaries are expected to benefit from a more accommodating yet well-regulated listing environment.