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BSEC imposes restrictions to discipline stockbrokers

Misappropriation of money, shares from investors' accounts


MOHAMMAD MUFAZZAL | March 23, 2022 00:00:00


The securities regulator will not renew the licences of stockbrokers until they adjust investors' money and shares kept in the stipulated accounts. Such brokers will not also be entitled to enjoy different other facilities.

The Bangladesh Securities and Exchange Commission (BSEC) imposed the restrictions on Tuesday to ensure security of investors' money and securities, and bring back discipline in the capital market.

Earlier, the BSEC found huge shortages of funds and shares in many consolidated customers' accounts maintained by the TREC (trading right entitlement certificate) holders - some of them embezzled investors' money and securities.

According to the order, renewal of licence of TREC holder companies and their DP (depository participant) will remain suspended until they adjust the shortages found in the consolidated customers' accounts.

"The TREC holders will be deprived of dividend against their shares held at the stock exchange until the shortages of the customers' accounts are adjusted," it added. The TREC holders get dividends every year as shareholders of the exchanges.

The BSEC officials said the number of errant TREC holders responsible for shortages in the accounts of investors has by now come down to 27.

Three brokers of Dhaka bourse - Tamha Securities, Crest Securities and Banco Securities - had embezzled huge amounts of investors' money and shares.

"The regulator issued the order to prevent misappropriation of investors' money and shares in future," said Mohammad Rezaul Karim, a BSEC executive director and spokesperson.

He said that accountability and transparency will be ensured to a large extent in the activities of the TREC holders following the regulatory order.

The BSEC's directive issued on Tuesday will also be applicable for the stock brokers who will misappropriate investors' money and shares in future.

The order said the TREC holders' due facilities offered for the initial public offering (IPO), repeat public offering (RPO) and qualified investors offer (QIO) will also remain suspended if they fail to adjust their clients' money and securities.

As eligible or qualified investors, the stock brokers avail quota facility in IPO, RPO and QIO.

The regulatory approval for opening new branches of brokerage firms was a long standing demand.

In its order, the securities regulator said the TREC holders will not be allowed to open new branches or digital booths if they fail to repay investors' money along with adjusting shortages of securities.

Besides, they will not be entitled to the facilities of free limit - the amount of aggregate (gross) trade exposure for each TREC holder on which no TREC holder's margin shall be applicable.

According to section 3 of the exchange's TREC holders' margin regulations 2013, the free limit will be Tk 100 million in respect of the stock exchange TREC holders' margin deposit with the stock exchange on each trading day based on the total buy exposure.

In case of foreign trades, the exposure will be on total gross trade exposure instead of buying exposure if there remains any unsettled sales exposure.

In its order, the securities regulator said the CDBL will keep the errant TREC holders under special observation for one year after making up for the shortages of investors' money and securities.

"Besides, the securities purchased through DP and consolidated customers' accounts will be examined twice a month," it said.

Both the stock exchanges and the CDBL have been asked to take necessary steps in implementing the regulatory order along with submitting a report in this regard to the commission.

Asked, CDBL managing director Shuvra Kanti Choudhury said that it was a very good order to bring back discipline in the market. "We will play our due role in executing the order for securing investors' money," said Mr. Choudhury.

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