Regulator to probe LankaBangla Investments over suspected financial misreporting

The Bangladesh Securities and Exchange Commission (BSEC) has ordered an inquiry into alleged financial irregularities at LankaBangla Investments Limited, involving negative equity accounts, irregular interest calculations, and violations of margin rules.
According to the order issued last week, the inquiry will examine whether the company declared or facilitated cash dividends during periods when it had negative equity or unrealised losses.
The investigation will also scrutinise the validity and disclosure of interest recorded as "interest suspense" against negative equity accounts. The regulator noted that Tk 17.09 crore was shown as interest suspense against a principal amount of Tk 4.57 crore without adequate ledger support or recognition in the audited financial statements.
This issue raises serious accounting and regulatory concerns. In standard financial reporting practice, interest income or expense must be supported by proper ledger entries and recognised in the audited financial statements in accordance with applicable accounting standards. Recording a large amount as "interest suspense" without documentary backing creates uncertainty about whether the income is genuine, recoverable, or properly calculated.
Moreover, the amount of interest-Tk 17.09 crore-appears disproportionately high compared with the underlying principal of Tk 4.57 crore, raising questions about the method of calculation and the period over which the interest was accumulated. If such data is not properly recognised in the financial statements, it may distort the company's true financial position and mislead investors about the quality of assets and earnings.
The BSEC further raised concerns over the non-recognition of Tk 109.73 crore in interest payable to LankaBangla Finance, which may have resulted in an overstatement of profit and retained earnings.
The inquiry will also assess whether the company failed to maintain required provisioning despite being granted time extensions.
In addition, the probe will see whether negative equity accounts were used for transactions, IPO applications or portfolio management activities, and whether margin limits were breached through such accounts.
The regulator will also investigate whether interest and portfolio management fees were unlawfully charged on negative equity accounts and whether margin accounts were opened or operated without valid agreements or beyond disclosed risk limits.
Another key area of the investigation will be the oversight responsibilities of the board and senior management, including possible misrepresentation in financial statements and accountability for regulatory non-compliance.
LankaBangla Investments, a subsidiary of LankaBangla Finance, is one of the country's prominent merchant banks engaged in investment banking and capital market services.
Established in 1997, the firm provides specialised services including corporate advisory, issue management for IPOs and bonds, and portfolio management for individual and institutional investors. The company is also known for its research services and plays a significant role in facilitating capital market activities as an investment partner.
The probe body has been instructed to complete the investigation and submit a report to the Commission within 60 working days of the order.

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