HC upholds min portfolio of Tk 3m to qualify for trading in SME stocks

The High Court has kept Tk 3 million as minimum investment to qualify for trading on the SME platform of the stock exchanges.
Now, an investor, who has been maintaining a portfolio of at least Tk 3 million in listed securities in any platform, can trade on the SME boards.
The writ petition filed over the matter has been disposed of, and so the latest order of the Bangladesh Securities and Exchange Commission (BSEC) is valid with immediate effect, according to a regulatory filing on Monday.
"Therefore, all the interested investors are requested to maintain a minimum investment of Tk 3 million in the listed securities at market value/cost for registration as qualified investor in electronic subscription system (ESS)," reads the filing.
Earlier in July 2022, the BSEC increased the minimum investment from Tk 2 million to Tk 3 million for trading shares on the SME platform.
At the time, the commission gave investors three months' time to increase investments to meet the requirement if they wanted to trade on the SME boards.
But advocate Mustafa Kamal filed a writ petition with the court in September 2022 against the BSEC order on behalf of investor Md Raju Hasan.
The court in November issued a stay order for two months. The BSEC then appealed to the High Court against the stay order.
The High Court bench of Justice Farah Mahbub and Justice Muhammad Mahbub Ul Islam discharged the order recently.
The court also said there would be no floor price for the SME market unlike the main board.
BSEC lawyer barrister AM Masum confirmed that the court's order went in favour of the regulator.
Share trading on the SME platform started on September 30, 2021 creating an opportunity for SME companies to raise capital from the primary market, a move to help them reduce debt burden, enhance corporate profile, and create optimal value.
Trading began on the DSE's SME board with just six companies with the free-float base index of 1000 points. At present, the number of companies listed on the board is 17.
Initially, the BSEC did not allow general investors to trade on the SME platform without prior permission, considering the high 'risk' posed by small capital-based companies.
The minimum portfolio size was Tk 5 million for trading on SME boards.
But due to poor response from qualified investors, stock prices started to fall and the index gradually plummeted below 600 points within five months from the start of the trading.
To attract investors to the SME boards, the securities regulator in February 2022 cut the investment requirement to Tk 2 million.
The regulator also relaxed rules for mandatory registration, saying registration would be complete automatically if an investor had a minimum investment of Tk 2 million.
Following these developments, the SME index started to soar, supported by an influx of investors, to reach 2,244 within the next five months when the main market endured losses.
Some SME stocks saw three to fourfold price surge during the time, which was seen critically by market analysts.
Following criticisms that easy access had led to the overpricing of the SME stocks, the regulator raised the minimum investment to Tk 3 million in July last year.

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