It is not the job of the securities regulator to take measures to influence the index of the secondary market, said the chief of the market watchdog.
Khondoker Rashed Maqsood, chairman of the Bangladesh Securities and Exchange Commission (BSEC) said this at a meeting with stakeholders on Monday when participants proposed measures to rejuvenate the capital market.
"Stakeholders' performances will reflect on the index," he said, adding that the market players should embark upon a drive to remove internal corrupt practices.
Meeting participants said a robust market would require listing of good companies and amendments to public issue rules.
The BSEC convened the meeting as part of a move to set up a roadmap for reforms to the country's capital market.
Representatives of the Dhaka and Chittagong bourses, depository authority, Capital Market Stabilisation Fund (CMSF), Central Counterparty Bangladesh Ltd. (CCBL), Bangladesh Institute of Capital Market (BICM), and Bangladesh Academy for Securities Markets (BASM) attended the meeting.
At the meeting, the stakeholders reached a consensus that they would work with the regulator for the developments of the market.
The Dhaka Stock Exchange (DSE) insisted on the introduction of new products and that legal structures of the bourses must change.
The Chittagong Stock Exchange (CSE) said the IPO (initial public offering) process needs complete overhauling.
The IPO (initial public offering) approval process should be modified by plugging the loopholes in the sponsor and placement shareholdings, definition of sponsor, unethical issuance of placement shares and earnings dilution, lock-in system for shares and book building method.
Ring Shine Textiles set a very bad example of malpractices in issuing placement shares. It boosted pre-IPO paid-up capital by disbursing placement shares to directors without any money paid by them. Later on, many of the directors fled the country with money realised from selling those shares in the secondary market.
The CSE said responsibilities of the BSEC and the bourses should be segregated and clearly defined to improve efficiency in the operations of the capital market.
It said the role to oversee companies' listing, market supervision and operations, broker-dealer supervision, post listing inspection and compliance, market promotion, TREC (trading right entitlement certificate) issuance etc. may be completely shifted to the exchanges.
Necessary measures should be taken to ensure fruitful outcome of the exchanges' demutualisation process, said CSE representatives highlighting the factors that hindered the growth of the market.
The factors that keep the market from flourishing are limited supply of securities, lack of quality listing, inefficient price discovery mechanism in public offering, family-dominant businesses, lengthy IPO approval process, easy access to long-term bank borrowing, and weak governance in listed companies and market intermediaries.
A low level of investment education and the lack of coordination between regulators in formulating market policies are other major reasons behind the sluggish market.
Apart from manipulative practices, the insufficient market infrastructure for surveillance, monitoring, and investigation impedes the market development.
The port city bourse also demanded immediate policy support to discourage long-term financing from the banking channel and incentives to help expansion of primary and secondary markets.
The Capital Market Stabilisation Fund (CMSF) said a dividend distribution hub might be created for timely payment of dividends.
It said it could play a role in the distribution of equity to investors of delisted companies, which would in turn ease the delisting process.
The Central Depository Bangladesh Ltd. (CDBL) proposed the establishment of a strong ICT recovery infrastructure for the market.
The Bangladesh Institute of Capital Market proposed extending its educational activities to divisional cities.
[email protected]
