UPDATE 1-Sri Lanka SEC director-general resigns out of "principle"

Last Updated: Fri, Mar 22, 2013 13:07 hrs

(Adds details, quotes)

By Shihar Aneez and Ranga Sirilal

COLOMBO, March 22 (Reuters) - The director-general of Sri Lanka's Securities and Exchange Commission said on Friday that he had tendered his resignation out of "principle", the third top SEC official to resign in the last 16 months.

Hareendra Dissa Bandara, a finance professor, did not give a specific reason.

"I have handed over the resignation letter," Dissa Bandara, who has been in the job since April, told Reuters. "I will resign with effect from May 27 and the resignation is based on my principles and the present set-up."

He declined to comment further.

SEC chairman Nalaka Godahewa said he could not understand the decision.

"I can't see a rationale behind his resignation as his term contract is to end on May 31," Godahewa told Reuters.

President Mahinda Rajapaksa, who is also finance minister, appointed Godahewa as chairman of the SEC in August following the resignation of Tilak Karunaratne.

Karunaratne said he had been under pressure after investors under investigation for market manipulation had made false allegations against him.

Karunaratne's predecessor, Indrani Sugathadasa, resigned in December 2011 saying she wanted to "uphold her principles" barely a month after her deputy was moved amid broker complaints that tougher regulation was hurting stock market prices.

Analysts and brokers have said tough regulations will be difficult to enforce as some politically influential investors are powerful enough to lobby against any regulatory investigations.

The SEC has been heavily criticised by some market players, who have claimed the stock exchange is over-regulated and blamed this for a 20 percent drop in the index in the first eight months of last year. (Editing by Nick Macfie)

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