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Active BO accounts down 33.51 per cent

IPO shares on pro-rata basis instead of lottery

Mohammad Mufazzal | September 22, 2021 00:00:00

Number of active BO (beneficiary owner's) accounts declined 33.51 per cent in nearly last four months mainly because of reduced scope of applying for IPO (initial public offering) shares, insiders said.

The number of active BO accounts was 2.66 million on May 31 last and the figure declined to 1.99 million on Tuesday.

As a result, investors' BO accounts dropped 33.51 per cent or 0.67 million since May 31 last.

Gholam Rabbani, a general manager at Modern Securities, said a section of IPO seekers earlier maintained a large number of BO accounts.

"The scope of getting IPO shares has reduced after the securities regulator introduced the system of allotting IPO shares on pro-rata basis instead of lottery. That's why those IPO seekers have not renewed many of their accounts," Rabbani said.

He said presently a BO account holder has to keep investment worth Tk 20,000 in his account to be eligible for applying IPO shares.

"Besides, an investor is not allowed for applying IPO shares worth above Tk 10,000 which was previously Tk 50,000. So, the number of BO accounts maintained by IPO seekers declined significantly due to reduced profit margin from the IPO shares," Rabbani added.

To trade in the secondary market and apply for primary shares, an investor has to open a BO account with Central Depository Bangladesh Limited (CDBL) through a depository participant, which is usually a stockbroker or a merchant bank.

Asked, a senior CDBL official said the DPs (depository participants) suspend BO accounts in July every year if an investor fails to pay annual fee of maintaining BO accounts by June.

"The non-payment of annual fees many be another reason behind closing a large number of BO accounts," said the CDBL's official.

In 2016, Bangladesh Securities and Exchange Commission (BSEC) reduced the renewal fee to Tk 450 from Tk 500 for each BO account with the aim of reducing financial burden on investors.

Of Tk 450, Tk 200 goes to the public exchequer, Tk 100 to DPs, Tk 100 to the CDBL and the remaining Tk 50 to the BSEC.

A senior official of a leading brokerage firm said many IPO seekers who earlier maintained a large number of BO accounts have little contribution in the secondary market.

"That's why, the reduction of BO accounts left no negative impact on the secondary market which exhibited rally in recent months," the official said.

The number of active BO accounts declined 33.51 per cent since June last while Dhaka Stock Exchange (DSE) saw 17 per cent in broad index during the period. On Tuesday, the DSE broad index DSEX closed at 7258.57 points which was 6219.94 points on July 5 last.

Of total BO accounts found active on Tuesday, residents maintain above 1.8 million accounts while the remaining 90,358 accounts are maintained by non-residents.

In accordance with gender wise calculation, males own above 1.47 million accounts while females maintain above 0.49 million accounts.

In its latest amendment brought to public issue rules, the securities regulator has revised the IPO quota.

In the revised rules, the BSEC has included an optional scope of issuing 15 per cent of the IPO shares under private offer.

Excluding the portion of private offer, general public including NRBs and eligible investors (EIs) including mutual funds (MFs) would avail 75 per cent and 25 per cent IPO quota respectively under the fixed price method.

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