The efficacy of BSEC autonomy

Over the last few months, the single day ups and downs of the benchmark index of the country's premier bourse Dhaka Stock Exchange (DSE) were not remarkable. The movement of the index was like the proverbial monkey climbing a vertically set oily bamboo.
The DSE launched the new benchmark index -- DSEX -- on January 27 last with a base of 4055 points.
Over the last 11 months, the ups and downs of the DSEX were limited within the range of 3438 and 4201 points. On February 6 the market closed at 4201 points, on March 03 at 3766 points, on April 30 at 3438 points, on June 6 at 4048 points and on November 20 at 4439 points.
Except the steepest single-day rise of 146.93 points or 3.74 per cent on July 24, the rise and fall of the benchmark index was not anything worthy of mentioning. Sometimes, the market insiders looked happy as the market did not go down heavily amid political uncertainty.
During the period, share prices of the companies having weak fundamentals like the Mithun Knitting, CVO Petrochemical Refinery, Tallu Spinning and Bangas rose abnormally despite the launch of the market surveillance software of the Bangladesh Securities and Exchange Commission (BSEC). The manipulators were hardly identified and punished.   
Meanwhile, the officials and the policy makers of the BSEC have also termed the prevailing market situation stable. According to them, after the stock market debacle of 1996 the market was not able to bounce back to such a normalcy within such a short time.
The BSEC policy makers said they brought amendments to many securities rules alongside a 10-year master plan.
It's true that the securities regulator has brought changes in some rules including the amendment to the book building method and private placement rules to curb mass scale distribution of placement shares.    
 Meanwhile, on November 24, in presence of Prime Minister Sheikh Hasina, Finance Minister AMA Muhith termed the present regulatory body BSEC most successful since its inception.  
The BSEC takes pride to say that the regulatory body is more powerful than any other commission in Bangladesh. The securities regulator can issue any directive for the issuers under the section 2CC. Recently, the securities regulator has achieved another safeguard -- 20A -- to control the stakeholders. At the same time, now the regulator is able to announce its own annual budget.
But the question is whether the regulator is yet to prove itself independent in regulatory activities. The most visible tendency of the regulatory body is to impose some penalties on the manipulators. The latest penalty worth Tk 2.2 million was imposed on three companies for playing a role in the abnormal price hike of the CVO Petrochemical Refinery.     
The CVO Petrochemical is out of operation for long days and recently the DSE put the company in the "Z" category. According to a DSE investigation, the CVO Petrochemical Refinery has awarded illegally at least 0.14 million bonus shares worth around Tk 12.27 crore to an individual who did not own any share of the company before the record date.
The regulator fined those who were responsible for abnormal price hike, although a question arises regarding the amount of the penalty.
What is the practice of imposing fines on manipulators in other countries? The securities regulators of other countries first forfeit the money equal to the amount of the profit secured by breaching the rules. Then they fix the amount of penalty. As a result, a manipulator finds no scope to escape the fine if he or she is once caught by the regulator.
It will be clear if someone looks at the actions taken by the SEBI against the big shots. Recently, the SEBI asked Sahara Group to refund Rs 24,000 crore to investors and following an order by the Indian Supreme Court.
The BSEC only fined the firms that were behind the abnormal hike in share prices of the CVO Petrochemical Refinery. But it is yet to be known that the company was brought under the purview of punishment for awarding illegally 0.14 million bonus shares to an individual.
According to market insiders, the low level of punishment inspires the manipulators to indulge in wrongdoings in the country's capital market. A manipulator is not supposed to have any objection to pay the penalty worth above or below Tk 1.0 million if he makes a profit worth Tk 10 million.  
So, it's not illogical to raise a question regarding the autonomous power of the securities regulator.
The writer is Staff Reporter of the FE