DSE to raise concern to BSEC

The Dhaka Stock Exchange (DSE) board will raise its concern to the securities regulator over the move of some companies, which are in the pipeline to go public with 'fabricated' financial disclosures and various 'loopholes', officials said.
The decision was taken Tuesday at a meeting held between the DSE board of directors and the proposed DSE Brokers Association of Bangladesh for the sake of investors and market, they also said.
At the meeting the issue of giving regulatory consent to the controversial IPO (initial public offering) proposals was mainly discussed, and the brokers were very much vocal against the non-performing issues, sources said.
"At the meeting it was finally decided that the department concerned will review the IPO prospectuses of the companies, which are on the queue to go public. The DSE board will raise its concern to the securities regulator over some companies' move to go public with fabricated financial disclosures," a DSE director told the FE.
He said DSE will also recommend positively for a company having financial strength and good management.
"A DSE member told the meeting that the premier bourse should raise its concern over giving approval to the controversial IPOs. It's a matter of the securities regulator whether it would evaluate DSE's observation or not," said the DSE director.
He said at the meeting the DSE members especially spoke about the regulatory approval to FAR Chemical Industries and Khulna Printing and Packaging.
"Two directors of FAR Chemical were involved with the rights share scam of RN Spinning Mills. The Bangladesh Securities and Exchange Commission (BSEC) approved the IPO proposal of FAR Chemical although the regulator earlier filed criminal cases against those two directors," another DSE member told the meeting.
The BSEC officials said some 45 companies are presently awaiting the regulatory approval to go public.
Dr. Mahmood Osman Imam, a professor at the Department of Finance of the University of Dhaka, welcomed the DSE decision for the sake of fulfilling the listing requirement.
"This idea is a very good one. The independent directors are the majority in the board of the demutualised exchange. So, the securities regulator will definitely evaluate the DSE's observation, if it is sent by taking approval of the board."
He also said the DSE move should focus more on large companies instead of small ones.
The sources said a DSE member told the Tuesday's meeting that some companies, which are going public with a face value of Tk 10 each, are not eligible to get even Tk 5.0 for each share.
The premier bourse formed a 14-member expert panel on April 25, 2012 to examine the draft prospectuses of the companies willing to go public.
The panel was given the responsibility of looking into the companies' balance sheet, accounts, earnings per share, net asset value, business performance and growth, credit rating, valuation, risk factors and the IPO offer price in the prospectus.
Later, the DSE dissolved the panel, as its observations were 'not evaluated' by the securities regulator while giving consent to the IPO proposals.
"Some companies are looting public money in the name of public offerings. The DSE must raise its concern over the forgery made through IPO," a DSE member told Tuesday's meeting.
"The demand for demutualisation became stronger following our alleged failure regarding market operation. Now we want to see the reflection of demutualisation in the capital market," another DSE member told the meeting while addressing the necessity of workable strategies.      
When asked, DSE managing director Dr. Swapan Kumar Bala acknowledged the decision, taken at Tuesday's meeting.
"It was decided that the DSE board will express its concern over some companies going public with irrelevant financial disclosures."
He said the decision of addressing the loopholes in those companies' prospectus was taken, as part of DSE's responsibility to the investors.
"The reactions and observations, made after an IPO proposal gets regulatory approval, are termed as anti-public interest attitudes. So, DSE will express its concern or positive recommendations before approval of any IPO proposal."
"DSE may inspect the companies that will submit applications for going public. The information, collected through evaluating their physical existence as well as prospectus, will be submitted to the board," the DSE MD added.