Exchanges should be free to exercise power to delist non-performers

Stockbrokers demand introduction and proper execution of delisting regulations for non-performing companies to ensure qualitative development of the capital market.
While listing of well-performing companies will expand the market, there must be a legal framework to remove non-performers from the bourses.
"The existing provision should be streamlined to ensure its exercise," said Md Saiful Islam, president of the DSE Brokers Association (DBA), at a press briefing organised by the Dhaka Stock Exchange (DSE) at the Dhaka Club on Thursday.
Many companies devoid of management, operations and tangible assets are listed on the bourses. "General investors are deceived into investing in those companies. So, a qualitative change should be ensured through delisting of those companies," said Mr Islam.
As per the DSE Listing Regulations 2015, any listed securities may be delisted if the issuer has failed to declare dividend (cash/stock) for a period of five years from the date of declaration of latest dividend or the date of listing in the equity market.
A company may also be delisted if the issuer has gone into liquidation either voluntarily or under obligation of a court order or has kept its commercial operation/ production/exploration stopped for a period of three consecutive years.
But the problem is that the exchanges are unable to enforce these provisions without consent from the securities regulator.
On a review of the performance of 14 companies, the prime bourse in 2019 sought instructions from the Bangladesh Securities and Exchange Commission (BSEC) but to no avail. So, the plan to delist the companies could not be executed.
"Previously, delisting of non-performing companies was hindered by the securities regulator," said Minhaz Mannan Emon, a DSE director.
The market watchdog even asked the DSE to relist some companies after they had been removed from the main board.
Rahima Food Corporation, for example, was delisted in July 2018 and then relisted two years later by the stock exchange under the pressure of the securities regulator.
Reform plan
DSE Chairman Mominul Islam presented a keynote paper on the DSE's reform plan at the briefing.
He said the stock market had completely failed to play an effective role for the country's economic development in the past 15 years due to inefficiency and irregularities.
The companies, which entered the stock market during the time, have mostly turned out to be weak. The number of beneficiary owner's (BO) accounts halved while the number of active BO accounts fell remarkably, said the DSE chair.
Foreign portfolio investment is one of the key indicators of the growth of a market. At present, foreign investment plunged below 1 per cent of the prime bourse's market cap, while corporate bonds account for less than 1 per cent of the total market cap.
"We have allowed irregularities and malpractices for a long time, hindering the capital market's growth," said the DSE chief.
Bringing new initial public offerings, expanding the corporate bond market and popularizing mutual funds are "our priorities for market development," said the DSE chairman.
The DSE is working to adopt an integrated, efficient and cost-effective trade ecosystem for market players.
"The greatest transformation of the country's capital market is underway and the prime bourse will be at the centre stage."
The prime bourse will launch a disaster recovery site (DRS) by July, aimed at recovering data if there is any technical malfunction.
Mr Mominul Islam also said the premier bourse was exploring how to make trade settlement more cost effective and efficient while strengthening technological capacity for effective market monitoring. The prime bourse is looking for ways to prevent insider trading and market manipulation.
"We are working with the affected investors [victims of malpractices] and will make sure no one is affected in the future," he said.
"It will take some time to enable the institutions," the DSE head said.
The Central Counterparty Bangladesh Limited (CCBL) is under scrutiny of the strategic committee. "It would not be wise to take on any costly project right now."
Last month, the prime bourse called for an immediate halt to the procurement activities of the CCBL, citing concerns over governance, transparency, and operating inefficiency.
The DSE urged suspension of procurements exceeding Tk 10 million for six months, proposing the formation of a joint commission to review past decisions and chart a corrective path forward.
"This is not just about shareholder protection but also safeguarding national interests," said the DSE chairman.
"The regulator [incumbent commission] has so far not tried to intervene in a single job of the premier bourse. We are optimistic that the exchange will be able to conduct risk management and development works in a comprehensive way," said Mr Mominul Islam.
While the present government has been emphasizing an overhaul of the banking sector, "We are working to get the capital market on its priority list," said Mr Islam, referring to the recent meeting with the finance adviser.
He claimed that whenever the exchanges came up with proposals and placed those before the BSEC, the regulator told them they would send those proposals to the Financial Institutions Division for decision.
So, instead of power being decentralized, it is being re-centralized, Mr Islam said, adding that the practice needs to stop.

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