Clients of 15 brokers suffer as DSE searches for remedy after DP licence suspension

Latif Securities and its clients have been unable to make any share transaction since May 25 as the securities regulator cancelled the broker's DP (depository participant) license for fund shortage in its consolidated customer account (CCA).
Without a DP licence, a brokerage firm cannot run its regular trading operation.
Latif Securities is not alone in this. There are 14 other stock brokers whose clients have long been suffering for the cancellation of DP licences of the brokers over various issues of non-compliance, including mismanagement and embezzlement of clients' money, according to the Central Depository Bangladesh Ltd. (CDBL).
The companies include Banco Securities, Samin Securities, Shah Mohammad Sagir & Company, Saad Securities, Alliance Securities & Management, and Crest Securities.
Several of these firms have their licences suspended for years but their clients have hardly gotten any remedy. Their investments have remained illiquid since the Bangladesh Securities and Exchange Commission is yet to derive a solution.

"The regulator will think about how to reduce investors' sufferings caused by the suspension of trading licenses," said BSEC spokesperson Mohammad Rezaul Karim.
He added that clients of a non-operational brokerage firm have the scope of transferring their holdings to a link account with another brokerage firm.
Investors can open a link account and transfer shares with consent of the firm they are client of.
The process is easy, but in many cases the existing brokerage firm shows reluctance in transferring the shares, said Managing Director of Midway Securities Md. Ashequr Rahman.
However, when money has been siphoned off from the CCA, investors often find it difficult to recover all their assets. Hence, they make complaints to the Dhaka Stock Exchange and the BSEC, which could only be resolved after much scrutiny and verification.
At present, Latif Securities falls short of Tk 3.25 million in its clients' account.
Every stock broker has to maintain a CCA with any scheduled bank, into which clients deposit money for the purpose of buying and selling shares.
If the fund in the account is any less than the money deposited by clients, it indicates mismanagement or misappropriation or embezzlement of cash.
Some stock brokers, however, claim that such a situation sometimes emerges out of ambiguity in calculations.
Talking to the FE, the chief executive officer of Latif Securities, Mohammad Mohsin said the broker had purchased shares for many clients before receiving money from them based on relationships.
That boomeranged on the broker when clients did not pay off the money on time, he said.
The company is now trying to fill the gap in the CCA from money in its own account. It has been paying a penalty of Tk 5,000 a day since the licence cancellation and will have to continue paying until it gets its licence renewed.
Around the time when Latif Securities' licence was scrapped, Sinha Securities was also punished for a fund shortage of Tk 100 million in its CCA.
Sinha Securities' licence was renewed last week on condition that it will deposit the money back into its clients' account in installments over the next six months.
Latif Securities' clients, however, are still barred from trading on the exchange.
"The company might have other issues of non-compliance," said Mr. Karim. The fund deficit might not be the only reason behind the suspension of its DP license, he added.
Four more brokerage firms have fund deficits -- between Tk 6.25 million and Tk 330.47 million.
The companies are Modern Securities, Asia Securities, Fareast Stock & Bond and PFI Securities. Of them, PFI Securities has the highest deficit of Tk 330.47 million.
If these companies fail to resolve the matter before the time of their licence renewal, their clients would also fall into the trap of missing shares, complaint filing and tracing of their holdings.
Earlier, many stock brokers were found guilty of fund embezzlement, which led to deficits in the CCAs.
The securities regulator had discovered that some of those companies even purchased furniture and paid salaries to the staff with money from the clients' accounts.
Some of those even had not maintained separate accounts for receiving their clients' funds.
This is the backdrop to the regulator giving warnings, imposing fines and issuing a directive in March 2022 setting the provision of not renewing DP licenses, curtailing stock brokers' dividend from the exchange and barring them from getting the IPO (initial public offering) quota.
By January this year, a total of 62 brokerage firms adjusted deficits. Six firms, including Sinha Securities and Latif Securities are yet to do so.
Meanwhile, clients of 14 brokerage firms have continued suffering as their claims are yet to be settled.
"The exchange settled many claims on pro-rata basis. Other investors will be compensated too on receipt of funds," said Mohammad Asadur Rahman, company secretary of the DSE.
Madhab Chandra Das, managing director of Alliance Securities & Management whose DP licence was suspended last year, said the broker had sought guidelines from the securities regulator to settle clients' claims.
The company had failed to submit audited reports due to conflicts among owners.
Asked about compensation for the affected investors, Mr Das said, "It will also depend on the regulator's decision."
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