An amendment to the Securities and Exchange Ordinance, 1969 has paved the way for compensating the aggrieved investors with the penalty money realised from the errant listed companies or brokerage houses.
Stock exchanges or the Securities and Exchange Commission (SEC) usually impose penalty on the errant listed companies or brokerage houses but the investors do not receive any amount from the penalty money so far.
The aggrieved investors will be enjoying the facility for the first time through new law titled Securities and Exchange (Amendment) Ordinance 2008 effective from June 4,2008.
The council of advisers approved the new law on May 11. The law incorporated some new measures for the first time to protect the interest of the investors.
"Such provision was absent in the previous ordinance although the SEC and the stock exchanges realise huge penalty," said Dhaka Stock Exchange chief executive officer Salahuddin Ahmed.
The money recovered from the penalty, however, went to the government coffer. The money was not utilised for the benefit of the investors.
The new provision now will be helpful for the small investors in the long term as the stock market has already been expanded throughout the country.
The total market capitalisation of the DSE which has surged to about US$ 12.7 billion in recent months is a testimony to that fact, he said.
The market capitalisation hovered below $5.0 billion in December 2006.
Besides the provision of compensation, the new law will allow the market regulators to reimburse its expenditures on investigation or inquiry from the penalty.
But if the regulator considers that it is not possible to compensate the aggrieved person for factors like difficulty of notifying the person whom it is appropriate to compensate, it may decide not to disburse the fund to the aggrieved person.
The money than will be deposited to the 'Investors Compensation Fund' to be maintained by the stock exchanges or Investors Education Fund by the SEC, according to the new law.
The new law prescribed tougher punishment to companies guilty of violating rules and regulations including 45-day trade suspension and the regulator can extend the duration of the punishment by another 45 days.
The previous law prescribed 14-day trade suspension for any such company and the punishment could be extended by 14 more days.
In line with the old law, any company facing an investigation was not bound to disclose information to any investigation committee. But the new law made it mandatory for companies under investigation to reveal information to investigators.
