CDBL to freeze dormant BO accounts to safeguard investor assets

The depository authority has decided to designate BO (beneficiary owners') accounts with no transactions for at least one year as dormant, prohibiting any debit of shares or funds from these accounts to safeguard the assets they hold.
It is planning to submit a proposal to the Bangladesh Securities and Exchange Commission (BSEC) shortly to obtain approval, a senior official at the Central Depository Bangladesh Ltd. (CDBL) said, wishing not to be named.
The proposal has been considered after fraudulent brokers, such as Moshihor Securities, embezzled clients' money and shares by taking advantage of clients being completely in the dark about their account status.

Opportunities for such misconduct also arise when information about BO account holders is incomplete during the submission of account opening forms.
According to CDBL information, about half of the BO accounts with share balances have incomplete information on the account holders, with, for example, NID numbers, email addresses, and/or bank account numbers missing.
The number of BO accounts with share balances stood at 1.20 million as of Tuesday.
More than 0.55 million accounts have neither NID numbers nor email addresses submitted, according to CDBL. Information regarding bank accounts has not been updated for more than 50,000 BO accounts.
Because of the missing data, BO holders do not receive notifications-SMS alerts, emails, and monthly portfolio statements-from CDBL.
Taking advantage of this, unscrupulous brokers conduct transactions in such accounts and move assets away from them.
A majority of BO accounts with incomplete information were opened before 2010. At that time, bank account numbers had fewer digits.
Over time, more digits have been added to bank account numbers, but many BO account holders have not updated their information.
Moreover, earlier, merchant banks used to conduct transactions on behalf of a large number of clients under a single account, namely an 'omnibus account'.
After 2013, portfolio managers were asked to open separate accounts for their clients.
However, the opening of separate individual accounts was sloppy, with little attention to information requirements. There are instances in which more than a hundred accounts were opened using a single bank account.
As a result, a substantial number of BO accounts still have incomplete information with CDBL.
These clients, who are difficult to trace, also do not receive dividends disbursed by the issuer companies.
The BO accounts, with incomplete information, according to CDBL, should be suspended.
If accounts are suspended, CDBL will reactivate them following applications from the account holders.
"Like the banks, CDBL will re-activate the dormant accounts following pleas from the holders. Such action will protect the securities in inoperative accounts," said the CDBL official.
Banks label accounts as inoperative if clients have made no transactions for six months.
If the status remains the same for another 12 months, the accounts are considered dormant, while a current or SND (special notice deposit) account is marked as dormant after six months of inoperative status.
According to CDBL information, a good number of BO accounts previously opened with the Investment Corporation of Bangladesh (ICB) have incomplete information.
As per the existing provision, bank account numbers and mobile numbers are mandatory for opening a BO account.
Meanwhile, the securities regulator has asked CDBL to submit a proposal on how KYC (know your customer) can be ensured.
The depository authority is likely to submit the proposal next week.
In its proposal, CDBL is likely to include a provision for adding NID (national identity) card numbers to the BO account form.
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