Junk shares and spot market trading prompt SEC probe
Thursday, 27 May 2010
Mohammad Mufazzal
The securities regulator served show-cause notices Wednesday on three financial institutions, including a bank, for non-compliance of securities law in giving margin loans and the netting facilities.
The move came after an inspection was conducted by the Securities and Exchange Commission (SEC) regarding the trading of some junk shares, and the spot market trading of Grameenphone shares.
The SEC dispatched two probe bodies to find out the reason for breaking records one after another last week and the crossing of the key index at Dhaka stock exchange (DSE) the 6,000-mark for the first time in the country's history on May 23.
"The SEC probe bodies have collected more data from other houses, which are under justification. The SEC will issue show-cause notice to them after finding any irregularities," the SEC executive director told the FE.
The probes detected the City Bank Limited, LankaBangla Securities Limited and LankaBangla Finance Limited for giving margin loans violating the existing loan ratio criteria 1:1.5, set by the SEC.
The SEC show-cause has asked the first two aforesaid financial institutions to appear before it for hearing separately on May 31 and the last one on June 14.
The City Bank facilitated two institutional investors by giving the margin loan amounting to more than Tk 51.50 million and Tk 25.2 million at the ratio of 1:1.8 and 1:2.4.
The bank also gave margin loan to an individual investor amounting to Tk 33.2 million at the ratio of 1:1.56.
The LankaBangla Finance gave margin loans amounting to Tk 77.22 million to three individual investors at the ratio of 1:1.8, 1:2 and 1:2.1 respectively.
The LankaBangla Securities offered netting facilities to three individual investors in buying a large amount of shares of Grameenphone.
"The investors are not allowed to buy the shares of any company in the spot market without cash money as per the existing rules of SEC. The brokerages and merchant banks also are not allowed to execute the buy-orders of shares before the deposited cheques have been cashed," the SEC executive director said.
"There is a chance of executing buy-orders by depositing blank cheques. That's why we are trying to find out such buy-orders, which were executed before the cheques had been cashed," he said.
The securities regulator served show-cause notices Wednesday on three financial institutions, including a bank, for non-compliance of securities law in giving margin loans and the netting facilities.
The move came after an inspection was conducted by the Securities and Exchange Commission (SEC) regarding the trading of some junk shares, and the spot market trading of Grameenphone shares.
The SEC dispatched two probe bodies to find out the reason for breaking records one after another last week and the crossing of the key index at Dhaka stock exchange (DSE) the 6,000-mark for the first time in the country's history on May 23.
"The SEC probe bodies have collected more data from other houses, which are under justification. The SEC will issue show-cause notice to them after finding any irregularities," the SEC executive director told the FE.
The probes detected the City Bank Limited, LankaBangla Securities Limited and LankaBangla Finance Limited for giving margin loans violating the existing loan ratio criteria 1:1.5, set by the SEC.
The SEC show-cause has asked the first two aforesaid financial institutions to appear before it for hearing separately on May 31 and the last one on June 14.
The City Bank facilitated two institutional investors by giving the margin loan amounting to more than Tk 51.50 million and Tk 25.2 million at the ratio of 1:1.8 and 1:2.4.
The bank also gave margin loan to an individual investor amounting to Tk 33.2 million at the ratio of 1:1.56.
The LankaBangla Finance gave margin loans amounting to Tk 77.22 million to three individual investors at the ratio of 1:1.8, 1:2 and 1:2.1 respectively.
The LankaBangla Securities offered netting facilities to three individual investors in buying a large amount of shares of Grameenphone.
"The investors are not allowed to buy the shares of any company in the spot market without cash money as per the existing rules of SEC. The brokerages and merchant banks also are not allowed to execute the buy-orders of shares before the deposited cheques have been cashed," the SEC executive director said.
"There is a chance of executing buy-orders by depositing blank cheques. That's why we are trying to find out such buy-orders, which were executed before the cheques had been cashed," he said.