Move to amend direct-listing regulation hits snag

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Kayes M Sohel
A Securities and Exchange Commission (SEC) move to amend the Direct Listing Regulations 2006 has remained stalled for about a year.
The SEC, securities regulator, formed a committee in January last, but rejected the recommendations made by the committee saying these might fail to protect interest of the general investors.
Again in August last, the commission took a fresh initiative to amend the regulations and formed a committee that also submitted recommendations.
A high SEC official told the FE that the commission had formed the body to bring an amendment as there are flaws in the pricing system under the regulations.
He, however, declined to comment on the latest status of the amendment process.
The SEC took the step after the market was affected due to wild price fluctuation of Jamuna Oil Company and Meghna Petroleum on the their debut trading in the stock market.
Such incidence that dismayed the investors has prompted the commission to take the move to bring changes in the regulations, a source in the commission said.
Market expert Yawer Sayeed said, "Unfortunately, we have not learnt from the lesson."
He said, "Although we welcome the regulations, which aim to minimise the cost of listing of better performing companies."
The committee formed in second time made 10-point recommendations for amending the regulations.
The committee proposed that to become eligible for direct listing a company should have a paid-up of more than Tk250 million, which might help minimize manipulation as the number of shares will increase.
It recommended that giving 30 working days to both big and small issues for offloading shares is unethical. The timeframe for offloading of shares by a big company should be taken into consideration.
In direct listing regulations, the words 'Shall sell' should replace 'shall offer for sale', which has already created confusion in Titas Gas debut trading, the recommendation says.
It recommended that 30 working days is the equal time for a big or small issue, which makes disparity. So, the timeframe for offloading of a company with big size issue can be taken into consideration.
The words 'date of direct listing'in the regulations need to be replaced by 'first trading date' to avoid confusion because any issue might be listed on different date with the two bourses.
According to the present regulations, a public limited company will have to sell designated shares of its total floated shares within 30 trading days.
But the regulations did not mention any timeframe for selling the rest of the shares. "So, the timeframe is required to be set for the selling the rest of the shares," a source close to the meeting said.
Earlier, on February last the SEC chairman Faruq Ahmad Siddiqi told a private television channel that the existing Direct Listing Regulations need to be amended for the protection of small investors' interest.
The investor had bitter experiences about those issues listed so far under direct regulations.
Per share of Jamuna Oil surged abnormally to Tk 952 against the face value of Tk 10 only on the debut day on January 9 last, but it abruptly dipped below Tk 350 per share in the subsequent days.
Another state-owned Meghna Petroleum Limited that made debut on January 14 failed to attract the investors as only 26,800 shares were sold in its debut trading in the 'spot market' under direct listing rules.
Titas gas failed to sell any single share of it on debut trading on July 6 this year, drawing sharp criticism from different stakeholders.
The DESCO made debut on June 18, 2006 while PGCB on October, 9, 2006 amid allegations that direct listing regulations were violated by fixing lowest sale price.
Making debut on November 18 last, per share prices of the ACI Formulations Limited climbed to Tk 240 against the face value Tk 10 while Shinepukur Ceramics Limited share prices rose to Tk 96 a share against the face value Tk 10 each share.
On February 23, 2006, the capital market regulatory body approved direct listing regulations for the bourses to encourage the local and multinational profit-making companies to raise fund from the capital market.