BSEC identifies areas of discord with BB

Mohammad Mufazzal | Published: July 18, 2014 00:00:00 | Updated: November 30, 2024 06:01:00

The securities regulator has opposed some clauses in the proposed Finance Company Act (FCA), 2014 to avoid possible conflicts with the central bank while regulating subsidiaries of finance companies, officials have said.
The Bangladesh Securities and Exchange Commission (BSEC) submitted its opinions on July 8 in this connection to the Bank and Financial Institutions Division of the Ministry of Finance (MoF) by specifying the conflicting areas in the proposed FCA.
The BSEC especially raised its concern over the clause on formation, shareholding and inspection of finance company subsidiaries.
According to the draft FCA, the Bangladesh Bank (BB) will be able to inspect and instruct the subsidiaries of the finance companies, no matter whatever is there in other laws.
In this connection the BSEC has said the proposed clause is contradictory to the regulating authority of the securities regulator.
"The proposed clause is totally illogical and unnecessary, as there is every possibility of giving rise to a conflict between the regulators. The finance companies and their subsidiaries are registered by the BB and the BSEC respectively. That's why it will be out of jurisdiction of the BB, if it controls the operations of subsidiaries," the BSEC opinion reads.
The securities regulator has said the proposed provision of instructing the subsidiaries by the central bank will also be totally illogical, as the instruction over the activities of subsidiaries is a part of regulatory activities.
"The proposal of giving authority of delivering instructions to subsidiaries by the BB is totally illogical, as the job is out of the central bank's jurisdiction," the securities regulator said in the opinion.
According to another clause of the proposed FCA, a finance company registered in Bangladesh will include all its branches and subsidiaries situated in and outside the country.
In this connection, the securities regulator said it was illogical to mean finance company by including the subsidiaries, as the BSEC has its own guidelines of conducting inspection of activities of subsidiaries, licensed by the securities regulator.
"The securities regulator is the only authority concerned of conducting inspection of activities of subsidiaries, licensed by the BSEC. BB's cup of tea will be the parent companies and their exposure limit to the capital market," said a BSEC senior official.
Another clause of the proposed FCA, 2014 said the 'financing business' would mean business operations, conducted by collecting funds as per the ways approved by the central bank.
In accordance with the proposed clause, those business operations will include, among others, investment banking business and securitisation business. In this connection, the securities regulator opined that there was no scope of monitoring these activities by the central bank.
"These activities are done as per the existing rules and regulations of the securities regulator. That's why the proposed clause is contradictory to the existing rules and regulations," the BSEC said.
The securities regulator has also mentioned advisory activities of corporate and investment, investment activities and management by individuals, issuance of shares, stocks, bonds and debentures by any corporation, investment and re-investment in securities and buy and sale of marketable securities are executed as per the Bangladesh Securities and Exchange Commission (Merchant Banker and Portfolio Manager) Rules, 1996.
"That's why the securities regulator differs with the proposal of ensuring the proposed authority of another regulatory body over such operations," the BSEC said.
According to another BSEC opinion, the investment made in mutual funds by the finance companies should be deducted while calculating their investment cells.
Another clause of the proposed FCA, 2014 said the investment in one subsidiary by a finance company will not be more than 25 per cent of its realised capital. The investment in more than one subsidiary, if any exists, by a finance company will not be more than cent per cent of its realised capital.