SEC tightens listing rules to bring more companies to capital market

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Kayes M Sohel
The securities regulator tightened the listing rules on Tuesday, making it mandatory for companies with paid-up capital of at least 500 million taka to go public within a maximum three years after their operation, officials said.
The rules were tightened amending the securities rules 2006, allowing the public limited companies hardly any room to avoid being listed in course of their operation, the Securities Exchange Commission (SEC) spokesman Farhad Ahmad said.
"The SEC board led by the chairman made the decision today in a bid to increase the number of quality shares in the country's two stock markets," Ahmad said.
"The share markets will get a big boost because of the latest changes in the rules. We expect that dozens of top companies will be listed within a few years after the amendments," he said.
Under the latest amendments, a public limited company having a paid up capital of Tk 500 million must go public within three years after the publication of the newly amended rules.
A public limited company which has already been in commercial operation with at least Tk 500 million paid up capital must float shares within a year, according to the amended rules.
A private limited company having Tk 400 million paid up capital must be converted into public limited company within six months after the publication of the amended rules.
Earlier, any company seeking to raise its paid up capital had to float 30 per cent shares of its total paid up capital. But there was no mandatory timeframe for the listing.
The latest order will nullify all the previous rules on IPOs, the SEC spokesman said.
The date commercial operation of the company will be recognized according to the company's tax papers.
The SEC warned of stiff action against the violators of its latest decisions.
"We will be tough against the violators. It could be unlimited financial penalties," Farhad Ahmad said.
Experts hailed the SEC decision, saying the latest amendment would bring in more investors and stability in the stock markets.
"It's an outstanding decision. It's a great news for the share investors," said Moin al Kashem.
"It is very good move by the SEC. They have done it to make the capital markets vibrant and stable," said Yawer Sayeed, a top securities analyst.
"But the regulator should have given careful thought before making such a big amendment. They should examine how it is going to make impact in the macro-economy," he said.
Sayeed cautioned that the strong-arm tactics, however, could back-fire as a lot of entrepreneurs might be discouraged to make fresh investment in the country.
Presently, a handful of the country's top companies are now listed in the Dhaka and Chittagong stock markets. Majority of them avoid being listed, as they prefer financing by the banks, instead of making initial public offering (IPO).
In the last financial year, only Tk 3.10 billion was raised from the capital market, against the banks' industrial term loan of Tk 124.0 billion.
Brokers said lack of quality shares was mainly responsible for the poor market capiatalisation of the bourses.
The main Dhaka bourse has a market cap of over 11 billion dollars, which is only around 16 per cent of the Gross Domestic Product (GDP).