Regulator asked to look into share trading by DSE independent director

The Ministry of Finance (MoF) has ordered the securities regulator to look into the allegations of share manipulation against an independent director of the Dhaka Stock Exchange.
The directive was influenced by a report published recently by a Bangla national daily, according to which independent director Dr Abdullah Al Mahmud traded in shares in violation of the securities rules for personal gains.
Mr Mahmud should refrain from performing any duties as independent director during the investigation, according to a letter that the ministry sent to the Bangladesh Securities and Exchange Commission (BSEC) on Wednesday.
The ministry asked the stock market regulator to take action against Dr Mahmud based on the report to be submitted on completion of the probe within the next 30 working days.
Prof Mahmud, also a professor of the banking & insurance department, University of Dhaka, had been serving as chairman of the Nomination and Remuneration Committee (NRC) of the DSE board.
Mohammad Rezaul Karim, BSEC executive director & spokesperson, said the commission had asked the DSE to investigate the matter.
The Dhaka bourse formed a three-member committee on June 12 to probe the allegations.
"We will send the report to the Ministry of Finance once the DSE probe committee submits the report," said Mr Karim. The BSEC itself will also form a committee to investigate the matter and take action against the independent director if found guilty, he added.
Prof Mahmud, who has three beneficiary owner's (BO) accounts, has been accused of trading in shares worth Tk 131.50 million as of April 30 this year, but he did not inform the exchange of executing the trades within a month after the transactions, as required by the securities rules.
"Ethically, independent directors should not be involved in share transactions as he knows a lot of inside information," said M A Baqui Khalily, former chairman of the finance department at the University of Dhaka.
Mr Khalily, who also served as DSE director for a decade, said the regulator should investigate whether Prof Mahmud had influenced any company board and gained personally through share transactions.
"If he did so, it's a serious crime."
The demutualisation scheme was passed in 2013, separating management and ownership of the bourses to bring transparency and accountability in the market after the 2010 market debacle.
The demutualised exchange has seven independent directors to sit among 13 members, including chairman. The objective of appointing independent directors was to protect the interest of investors and reduce the influence of brokers.
But there are allegations that independent directors do not play their due role in the meetings and that they remain mostly inactive.
Recently, Saiful Islam, president of the DSE Brokers Association of Bangladesh, at a post-budget press briefing demanded review of the decade-old Demutualisation Act, saying the reform measure failed to attain the goal of bringing transparency and accountability in the operations of the bourses.
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