The securities regulator has proposed restructuring the board of the Capital Market Stabilisation Fund (CMSF) and introducing an act to streamline its operations so that it can best serve the interests of investors.
The new commission, formed after the political changeover last year, identified anomalies in the Fund's operations and now considers strengthening its legal foundation by transforming it into a statutory body. An ordinance or act is required to achieve this.
Md. Abul Kalam, spokesperson of the Bangladesh Securities and Exchange Commission (BSEC), said the regulator had suggested an act that would consolidate previous rules and regulations, and the proposal was now awaiting the finance ministry's consent. In its submission to the ministry, the BSEC proposed a separate section in the act dedicated to all matters related to the Stabilisation Fund.
The proposals were submitted last month to the Financial Institutions Division (FID) of the finance ministry, following instructions from the finance adviser. The regulator said the main purpose of the move is to ensure the protection of investors' money.
According to BSEC officials, the need for board restructuring emerged after evidence of misconduct was found in the operations of the CMSF during the previous regime. The Fund had been managed by a nine-member governing body that included the chiefs of the two bourses and members appointed by the BSEC. The board's tenure ended on September 1 last year.
The new commission flagged the CMSF's operating expenses as abnormally high, raising concerns about the integrity of its former governing body. The body allegedly held as many as 10 meetings a month, with each member receiving Tk 8,000 in honorarium per meeting.
To address these issues, the BSEC has recommended forming a new seven-member board of directors, to be chaired by the BSEC chief. Other members would include an additional secretary of the FID, the chairmen of the two bourses and the Investment Corporation of Bangladesh (ICB), the president of the Bangladesh Association of Publicly Listed Companies, and the CMSF's CEO, who will also be a BSEC official serving in an ex-officio capacity.
The regulator also suggested rationalising the CMSF's manpower to reduce its operating expenses.
Wasi Azam, head of operations at the CMSF, stressed the urgency of forming a new board. "The formation of the board is very urgent as the management alone cannot take the responsibility of the large amount of investors' funds kept in the bank," he said.
The CMSF, created in June 2021 to settle investors' claims of undistributed or unsettled dividends, currently holds Tk 8.13 billion in undistributed cash in its bank account and stock dividends worth Tk 10.92 billion in its beneficiary owner (BO) account at current market prices.
While the Fund has settled undistributed cash dividends worth Tk 120 million and stock dividends worth Tk 2.38 billion, both the finance division and the new BSEC commission later questioned its structure, pointing out that it lacked a proper legal framework. Still, both parties acknowledged the Fund's importance in ensuring undistributed dividends are returned to investors, rather than benefiting issuer companies indefinitely.
The BSEC has further decided that the CMSF will not be allowed to invest in the equity market or provide loans using investors' money. However, it will be permitted to use its interest income for investor awareness programmes.
To curb costs, the regulator has proposed that the CMSF share facilities with the BSEC's financial literacy wing, the Bangladesh Academy for Securities Market, thereby reducing rental expenses. Currently, the CMSF office is located in the DCCI Building at Motijheel in the capital.
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