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Protection Fund to compensate clients of scam-hit brokers

Regulator asks Dhaka bourse to disburse Tk 250m

MOHAMMAD MUFAZZAL | October 04, 2023 00:00:00

The Investors' Protection Fund (IPF) of the Dhaka Stock Exchange (DSE) will disburse for the first time Tk 250 million to compensate investors, who fell victim to scams committed by four brokers.

In a directive signed on Sunday, the Bangladesh Securities and Exchange Commission (BSEC) asked the Dhaka bourse to pay the money to those who are yet to get any refund after losing assets to fund embezzlement.

As per the regulatory order, clients of Crest Securities, Banco Securities, Tamha Securities, and Shah Mohammad Sagir & Company will be paid on a pro-rata basis from the Fund.

Complaints/claims received until October 1 will be taken into consideration for compensation.

The brokerage firms siphoned off an aggregate of Tk 4.25 billion between 2019 and 2021 from the consolidated customers' accounts that they maintained for trading.

The Dhaka bourse received claims worth Tk 2.03 billion as of May this year from the brokers' clients, according to DSE data.

By July last year, Tk 47.60 million had been refunded to 423 investors of Banco Securities, Crest Securities and Tamha Securities proportionately following a directive of the BSEC.

The bourse made the payments by exerting pressure on the brokerage firms to deposit money to its account for the refunds.

Clients of Shah Mohammad Sagir are yet to get any refund. Recently, the DSE took a move to settle claims by selling the broker's licence.

Asked, the DSE company secretary, Mohammad Asadur Rahman said the bourse would verify claims to determine who would be compensated.

As of July, the Protection Fund had a balance of Tk 190 million, which rose to Tk 260 million after the inclusion of dividends disbursed by the DSE against stakes of five untraceable stock brokers.

In the directive, the BSEC said the compensation would not "absolve" the defaulters (trading right entitlement certificate holders) of their liabilities.

The victims of scam-hit stock brokers have not yet received any benefit from the Protection Fund though it was created as part of the 2014 demutualisation scheme.

The Fund size has also remained insignificant.

Each TREC holder received Tk 37.84 million against their 25 per cent holdings in the DSE sold under the scheme. Among the 250 shareholders, no claimant was found of the stakes of five shareholders of the DSE.

The five shareholders had received trading licences at the time of the formation of the premier bourse in 1954.

In absence of any claimant, the DSE received Tk 189.2 million against the stakes of the five shareholders, which was supposed to be transferred into the account of the Protection Fund.

The securities regulator recently formed an inquiry committee to dig out why the Fund had failed to protect investors and to find the people responsible for this.

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