When regulators are biased towards stock manipulators
FE Team | Published: April 10, 2011 00:00:00 | Updated: February 01, 2018 00:00:00
end result? Absolutely nothing will be done against the culprits, we can vouch, as
long as they have money power and as long as the government, we mean the elected
representatives, would think that they have nothing to gain by letting the cats
out of the bag,
Maswood Alam Khan from Maryland, USA
Since my childhood, the impression about a policeman or for that matter about any powerful and greedy man or woman I have got has been somewhat akin to the notion I had about vampires in comic books. Still today, whenever I come across powerful guys---especially government functionaries and businesspersons---I feel as if I were face to face with vampires who are under the command of the Dracula, the lord of all vampires. The vampires appear before me whenever I read or hear about robbers, murderers, land grabbers, adulterators, frauds, bribe-takers, unscrupulous government functionaries, dishonest politicians and also greedy investors---big or small.
Apparitions of vampires were vivid in my eyes when yesterday I was reading in the newspaper about some 60 individuals, many associated with Awami League (AL) and Bangladesh National party (BNP), who made fortunes through stock market manipulations, according to the probe made into the recent share debacle. As I was reading about the involvement of Securities and Exchange Commission (SEC), the prime regulator of stock market, I got really puffed out wondering, "What a haven for the protectors to become the predators the SEC has become in Bangladesh!"
More agonizing was the conflict of opinions between the finance minister and the probe chairman as to making public the names of the individuals who have been identified by the probe committee as the suspects involved in the nasty game of stock markets that helped swindle Taka 200 billion (20,000 crore) out of retail investors and siphon Taka 50 billion (5000) crore off the country, in deep collusion between regulators and big market players. Some names have already made public during discussions between the press and the probe members. The probe chairman Ibrahim Khaled held responsible the Securities and Exchange Commission, Dhaka Stock Exchange, Investment Corporation of Bangladesh (ICB), issue managers, issuers, valuers and auditors for the collusion that made the market volatile.
We, the onlookers, and those retail investors who have been fleeced by the scams are simply witnessing some dramas about probes, press reports, conflicts of opinions etc. What would be the end result? Absolutely nothing will be done against the culprits, we can vouch, as long as they have money power and as long as the government, I mean the elected representatives, would think that they have nothing to gain by letting the cats out of the bag. When the Dracula is made the head of the Blood Bank, are the blood donors left with any other option except yielding to the demand of the bloodsuckers?
Big traders all over the world are syndicated and they sit very close up to the big powers; they know how to dupe the small traders into plunking down their last coins to chase the mirage of profits.
Traders who incur loss in the games of shares are like gamblers who become bereft in the games of roulettes. Blaming the big players for the loss of small traders is an old cliché. The probe committee trotted out that billions of takas have been taken out of the market through direct listing, private placement, preferential shares, mutual fund, book-building methods etc. It is easy to write a report full of such tired clichés, but it would be a hell of a job to prove those charges in a court of law, especially when the regulators are biased towards the stock manipulators.
Traditions of these creatures, I mean of the big players in the stock market, die hard. They do not die like small fries. They do not die, like a bee, after the first sting. They are vampires; they grow strong and become immortal once intoxicated by easy money. So, it is a difficult job when one has to fight not one beast but legions of vampires that go on age after age after age, feeding on the blood of the living.
Let us, therefore, assume that the current regime of stock markets in Bangladesh will continue and the shrewd game of the big players to cheat the small ones will also go on unabated, forcing hundreds of thousands of our young men and women to be pinned down in the wilderness without an end in sight. Let us also assume that as a result of the regulators' bias towards unscrupulous elements the big fishes will go on devouring the small ones and the gullible players will keep crowding the stock markets in greater numbers only to be fleeced, thus leaving a gaping gap in our investment climate, and leaving the bereft behind having no means or the ingenuity to escape from the vicious cycle.
Instead of undertaking fruitless witch-hunts in a country where money can make a king servile to a petty servant we should rather be concerned with how we can guide our investors, especially those young and small investors who borrowed money from their parents to play with stocks. They need protections and tutorials so that they can shun the paths that were chosen by the losers in the past.
Many will agree with me that we are basically a very emotional race. We have a good number of ace cricket players and they have the verified talent and potential to beat any cricket team in the world. On many occasions our cricketers proved themselves as real tigers roaring with victories. But, the same cricketers did blunders that were beyond anybody's wildest imaginations. Why? The answer perhaps lies in our inbuilt inability to maintain our cool and composure. At one stage, when there is a demand to practice restraint, our cricketers think they can score a few sixes in a row. The same mental makeup is also there with our small investors who undergo a perception change when they think they can make money for sure by investing in a share that is ballooning up or diving down.
There are two emotions in particular that have been the proven sources of ruin for stock traders: Fear and Greed. Fear will cause you to either not make a trade when the opportunity arises, or to close a trade prematurely without giving it a chance to be profitable. Greed will cause you to make trades that are too large or too risky, while trying to make massive gains. The most dangerous is "Revenge Trading" when a trader gets into an emotional tussle with the market and becomes overly aggressive with trading. You've suffered some losses and you are understandably upset about it, so you set out to get revenge on Mr. Market, the one who took your money away.
Is there any advice or recommendations the probe committee did place in their voluminous report on what should be done for the small investors or how the investors should manage their portfolios so that they can escape in future the booby traps of the stock markets?
But from what we heard from the mouth of the probe committee chairman one can assume, before reading the whole report, that it was more like a post-mortem report to decide who be punished than a guide on what the future investors should do to hedge against future losses or what the policy makers should do to guard the interests of the majority of the investors. Surprisingly, the probe chairman did not mention in his encounters with the press about the gullibility of small traders who were also to a great extent responsible in letting the big fishes devour the small ones!
We wish the probe report, in addition to identifying the culprits of the past scams and recommending wholesale overhauling of different investment and regulatory bodies, also placed concrete recommendations, with clear examples, on what the Securities and Exchange Commission (SEC) should actually do and how the government should oversee the activities of the regulatory bodies and also how the small investors should learn the trading psychology and manage their trading risks.
(The writer can be reached at e-mail: maswood@hotmail.com)
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