Oct. 19 (Bloomberg) -- Sri Lanka’s securities regulator said it will review transactions by billionaire Raj Rajaratnam, who was charged by U.S. prosecutors for insider trading after they used wiretaps to build their case.

The regulator will review “significant” transactions carried out by Rajaratnam, Channa De Silva, director general of the Securities and Exchange Commission of Sri Lanka, said in an interview today. The commission will “collaborate” with foreign governments in their investigations.

“We don’t want a market glazed with investors of this reputation and will make every attempt to keep the Sri Lankan market clean,” De Silva said.

Rajaratnam, 52, is one of the country’s biggest investors. His funds hold stakes in People’s Merchant Bank Plc, DFCC Bank Ltd., National Development Bank Ltd. and Commercial Bank of Ceylon Plc, according to data compiled by Bloomberg. He’s also the second-biggest shareholder of John Keells Holdings Plc, the country’s largest publicly traded company.

Sri Lanka’s benchmark stock index, Asia’s best performer this year, is paring gains after Rajaratnam was told he faces a decade in prison if convicted at trial. The Colombo All-Share Index fell 1.6 percent to 3,082.91 at the close, the biggest decline since June 4.

Rajaratnam faces 13 fraud and conspiracy counts, many of which carry 20-year maximum sentences. Under federal sentencing guidelines, he faces 10 years in prison if convicted at trial, Assistant U.S. Attorney Josh Klein said in court yesterday. Galleon Partners, based in Manhattan, has offices in London, Singapore, Mumbai, and Menlo Park, California.

To contact the reporter on this story: Anusha Ondaatjie in Colombo at anushao@bloomberg.net

Last Updated: October 19, 2009 05:53 EDT