SEC order deals blow to brokerage house business
FE Repoet | Wednesday, 2 March 2011
FE Repoet
The fast expanding brokerage house involved in the capital market business, faces fresh blow with the latest SEC directive which has prohibited further opening of new brokerage branch. SEC took decision to stop further opening of new branch unless members of both Stock Exchange in Dhaka and Chittagong use uniform trading software. At present Dhaka and Chittagong brokerage firms use separate trading softwares. The officials of the brokerage house claimed that the latest SEC directive will caused substantial loss to business as they have already made initial investment to set up branches. According to them, the trading software, currently used in the brokerage house, are fully complaint with SEC surveillance system. According to a competent source of Dhaka Stock Exchange (DSE), currently at least 100 applications remain pending with DSE seeking opening of new branch offices in different parts of the country. Approximately, investment of TK 1 billion is involved with the process. With the new SEC directive those investment now faces uncertainty. Managing Director of Globe Securities Azizur Rahman, who is an applicant for a new branch, informed FE that in most cases brokerage firms have to strike five year agreement with landlords to set up a branch office. A handsome amount of money has to be paid in advance in the form of 'advance rent' to the landlord. "For staff appointment and decoration of brokerage house I have already invested Tk60-70 lakh to set up a branch office at Banani. With the latest SEC directive we will face financial loss as we have completed all the preparation to set up branch," said Aziz who oparates eight branches across the country. "It is unfortunate after completion of all the procedures SEC comes up with the decision to stop setting up new branch," he added. DSE sources say that in case of bank branch the authority starts the process of establishment of a new branch after getting the approval for the bank branch. Whereas, in case of brokerage firm the procedure is different. The authority has to finish the decoration and appointment procedure in order to get permission for a new branch of brokerage house. On condition of anonymity, a high official of a leading merchant bank said, "we have already appointed workforce and rented premises to set up a branch of merchant bank and brokerage house in Khulna. As it is not possible for merchant bank clients to trade without brokerage house the operation of merchant banking itself is impossible. But we have to pay the salary and rent of the premises. "We don't know on which ground SEC took the decision. But if the decision is taken on IT issues then we can say our software now in use are fully complainant with the SEC regulation, said the merchant banker adding that SEC and DSE should bolster the surveillance software in order to monitor the newly established brokerage house.
The fast expanding brokerage house involved in the capital market business, faces fresh blow with the latest SEC directive which has prohibited further opening of new brokerage branch. SEC took decision to stop further opening of new branch unless members of both Stock Exchange in Dhaka and Chittagong use uniform trading software. At present Dhaka and Chittagong brokerage firms use separate trading softwares. The officials of the brokerage house claimed that the latest SEC directive will caused substantial loss to business as they have already made initial investment to set up branches. According to them, the trading software, currently used in the brokerage house, are fully complaint with SEC surveillance system. According to a competent source of Dhaka Stock Exchange (DSE), currently at least 100 applications remain pending with DSE seeking opening of new branch offices in different parts of the country. Approximately, investment of TK 1 billion is involved with the process. With the new SEC directive those investment now faces uncertainty. Managing Director of Globe Securities Azizur Rahman, who is an applicant for a new branch, informed FE that in most cases brokerage firms have to strike five year agreement with landlords to set up a branch office. A handsome amount of money has to be paid in advance in the form of 'advance rent' to the landlord. "For staff appointment and decoration of brokerage house I have already invested Tk60-70 lakh to set up a branch office at Banani. With the latest SEC directive we will face financial loss as we have completed all the preparation to set up branch," said Aziz who oparates eight branches across the country. "It is unfortunate after completion of all the procedures SEC comes up with the decision to stop setting up new branch," he added. DSE sources say that in case of bank branch the authority starts the process of establishment of a new branch after getting the approval for the bank branch. Whereas, in case of brokerage firm the procedure is different. The authority has to finish the decoration and appointment procedure in order to get permission for a new branch of brokerage house. On condition of anonymity, a high official of a leading merchant bank said, "we have already appointed workforce and rented premises to set up a branch of merchant bank and brokerage house in Khulna. As it is not possible for merchant bank clients to trade without brokerage house the operation of merchant banking itself is impossible. But we have to pay the salary and rent of the premises. "We don't know on which ground SEC took the decision. But if the decision is taken on IT issues then we can say our software now in use are fully complainant with the SEC regulation, said the merchant banker adding that SEC and DSE should bolster the surveillance software in order to monitor the newly established brokerage house.