Past missteps haunt BSEC as fresh lobbying begins for top posts

Strong lobbying has begun for the top positions at the securities regulator after the newly elected government assumed office last week.
Market experts insist that the right leadership is imperative for the capital market to recover from decades-old wounds inflicted by fraud and self-serving policies.
Prior to winning the election, the Bangladesh Nationalist Party (BNP) in its election manifesto pledged to appoint qualified individuals to regulatory positions to ensure the development of the capital market. However, stakeholders say the appointment process must carefully assess whether prospective candidates have any conflicts of interest in the market and whether they may be biased towards market-linked interest groups.
The FE correspondent spoke to at least half a dozen representatives of market operators to learn about internal discussions surrounding the expected changes at the Bangladesh Securities and Exchange Commission (BSEC).
Requesting anonymity, a market expert said his name had been proposed by a quarter, but he showed no interest.
Asked why others would recommend his name, he replied, "so that they could seek favour from them [aspirant candidates] after appointment."
He said the government should make its "own assessment and groundwork" before making appointments to key posts at the BSEC.
Interviewees said the securities regulator must act independently, without being influenced by politicians or businessmen, if investor trust is to be restored. Shortcomings stemming from a lack of experience can be overcome with integrity, management capacity and effort, they added.
Former chairman of the securities regulator Faruq Ahmad Siddiqi said remaining disconnected from market operators and vested quarters had helped him run the organisation smoothly.
He, however, stressed that new appointees must be easily approachable "so that there is proper coordination among the regulatory bodies and stakeholders."
Following the fall of the previous government on August 5, 2024, the interim administration appointed Khondoker Rashed Maqsood as chairman of the BSEC along with three new commissioners.
Mr Maqsood, a banker by profession, has failed to bring all BSEC staff together to make the regulatory body effective and functional, according to sources at the commission.
"Maqsood has distrusted almost all officials, which rendered the regulatory body almost non-functional," said a BSEC staff member, preferring anonymity.
Under Mr Maqsood, the commission placed greater emphasis on imposing penalties and reforming rules, while the market did not see a single IPO approved during his tenure.
Saiful Islam, president of the DSE Brokers Association (DSE), said new appointees must be well aware of the market's drawbacks so that they can work to elevate Bangladesh's status from frontier to emerging market.
Those who spoke to the FE highlighted the damage done under previous securities commissions, saying those issues must be addressed to help turn around the market.
After Faruq Ahmad Siddiqi completed his tenure in April 2009, Ziaul Haq Khondaker, then managing director of the Investment Corporation of Bangladesh (ICB), took charge as BSEC chief.
Under the Khondaker-led commission, massive violations of rules and regulations took place. The commission allowed aggressive distribution of margin loans beyond stipulated limits and approved rights offers and asset revaluations with disregard for the required preconditions.
Since May 2011, academicians were appointed as BSEC chief until the fall of the Awami League regime. Investors, market intermediaries and regulatory officials expressed disappointment over what they described as poor performance during that period.
After the 2010-11 stock market crash, the government appointed Prof M Khairul Hossain as BSEC chairman while simultaneously recruiting two other university teachers as commissioners.
A large number of companies entered the market under the Khairul-led commission. Many turned into junk stocks shortly after listing.
Take the case of Ring Shine Textile, for example. The company submitted a fabricated balance sheet along with its IPO proposal. The Dhaka Stock Exchange (DSE) flagged concerns over the company's financial statements. Despite the DSE's objections, the BSEC approved the IPO. The company's owners later fled the country after embezzling investors' money.
The Khairul-led commission also introduced a floor price to intervene in the price discovery mechanism and extended the tenures of closed-end mutual funds, a move that critics say damaged the country's mutual fund industry.
The commission led by Prof Shibli Rubayat Ul Islam from 2020 continued imposing floor prices on the pretext that they would prevent market free fall during the pandemic. It also allegedly favoured controversial market players such as Abul Khair Hiru and fund management company LR Global Bangladesh. Questions over conflict of interest arose after Shibli's son became a partner in an overseas company run by the chief executive officer of LR Global.
After the fall of the government in August 2024, the interim administration appointed Dr M Masrur Reaz, an economist, as BSEC chairman, but he eventually declined to join the regulatory body.
Later in August 2024, Maqsood was appointed BSEC chairman.
BSEC insiders and market operators say the Maqsood-led commission lacked management capacity and failed to build trust within the organisation.
Maqsood and his three commissioners faced protests from BSEC officials following the termination of an executive officer. The commission also took action against several officials, sending some into forced retirement and designating others as OSD (officer on special duty) over allegations of involvement in past irregularities.
Insiders alleged that the commission lacked the management capacity to revamp the BSEC by bringing all staff under one umbrella. They said dishonest officials should be punished while honest ones should be rewarded.
Stakeholders therefore believe the government should appoint individuals to the commission who possess an interactive attitude, management capacity and sound knowledge of the capital market. They must also be free from conflicts of interest and the influence of vested quarters.
BNP's handling of the country's capital market during its two tenures in the government between 1991-1995 and 2001-2006 was rather unblemished. It remains to be seen how the new government picks up the top team to oversee the operations of a troubled yet vital sector of the economy.

mufazzal.fe@gmail.com