DSE looks into clients' account fraud by AVIVA Equity

The Dhaka Stock Exchange (DSE) has formed a two-member team to investigate misappropriation of investors' money and other financial frauds committed by AVIVA Equity Management.
The premier bourse in a letter requested the managing director & CEO of the brokerage firm for cooperation with the inspection team. A copy of the letter issued on Monday has been seen by the FE.
The probe is to dig into, the DSE said, "sheer non-compliance, unbridled anomalies, and blatant violation of securities laws permeating every sphere of the organisation."
Mohammad Abu Nasar Mazumder, executive, and Md Bazlur Rahman, assistant general manager, of the monitoring and compliance department of the DSE, paid a visit to the brokerage firm on Tuesday.
Earlier in a regular inspection, the DSE found a number of irregularities, including a deficiency in the consolidated customer account (CCA), margin loans granted against negative BO (beneficiary owner's) accounts, dumping of shares in dealer accounts, and purchase of placement shares at excessive prices.
The DSE officials said Mohammed Shahidul Islam, managing director and chief executive officer of Aviva Equity, had acknowledged these irregularities.
Mr Shahidul Islam could not be reached by phone for comments despite repeated attempts.
In an inspection report submitted in July this year, the Dhaka bourse showed a deficit of Tk 30.6 million in the consolidated customers' account (CCA) of AVIVA Equity Management.
Examining bank documents of the firm, the DSE found the deficit in the clients' payable position. It then asked the CEO of the brokerage firm to fix the problem.
According to the July report, the AVIVA Equity owes Tk 72.2 million to its clients, but the DSE team found documents showing Tk 41.6 million in the clients' account.
Having found investors' funds worth Tk 30.6 million missing, the DSE sought documents relating to loans taken and transactions made by the company. But the company has not complied with the instructions.
On top of that, the Aviva Equity has been presenting fabricated data showing a surplus in the clients' payable position.
A stock broker has to maintain a CCA opened with any scheduled bank to receive clients' funds for the purpose of trading in the stock market. Any deficit in that account indicates that the stock broker has moved away that amount from the CCA.
"It is very much unfortunate and with grave concern we would inform you that the company has not provided pertinent supporting documents," reads a DSE letter issued earlier.
The bourse has not yet taken any stringent action against the company even though it did not get any response to its queries about negative equity.
Mohammad Rezaul Karim, BSEC executive director and spokesperson, said action would be taken based on the probe report.
"The commission will take strict actions against those who were involved in the irregularities," he said.
Earlier, four brokerage firms --- Tamha Securities, Banco Securities, Crest Securities, and Shah Mohammad Sagir -- embezzled investors' money worth more than Tk 2 billion between 2019 and 2021. Trading in these brokerage firms has remained suspended.
Nearly four years later, the Dhaka bourse recently began compensating the clients of the brokers from the Investors' Protection Fund.
Some 8,581 defrauded investors will receive payments in the first phase through the banking channel on a pro-rata basis.
The DSE for the first time will disburse Tk 250 million from the Protection Fund, which is around one-eighth of the money claimed.

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