The securities regulator has decided to hand over the responsibility of dealing with initial public offerings (IPOs) to the stock exchanges.
So, from now on, the bourses will scrutinise IPO proposals and sit with issuers, auditors, or any other parties relevant in the IPO approval process.
The Bangladesh Securities and Exchange Commission (BSEC) will only approve a proposal verified and vetted by the stock exchanges.
"We will remove legal obstacles, if there is any," said BSEC Chairman Prof Shibli Rubayat Ul Islam during a recent interview with The FE, in ensuring that the Dhaka and Chittagong bourses would be able to do the job smoothly.
The exchanges have already been asked to inform the BSEC of any issues that may come in the way of the execution of the task.
The securities regulator will also remove itself from the role of monitoring the secondary market and index movements and give it to the exchanges.
Mr Islam communicated the decisions to officials of the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE) in the very first meeting after he assumed office for the second term.
The exchanges have been asked to take on the job of examining IPO proposals and start campaigns for bringing in good companies for listing in the stock market.
As per the existing system, a company willing to raise capital from public investors submits an IPO proposal to the securities regulator. At the same time, the issuer submits an IPO prospectus to both the stock exchanges.
On receiving the proposal, the BSEC looks into it and demands answers from the issuer to its queries.
Sometimes, the regulator deploys investigation committees to find out if there are any anomalies in the documents provided to back up the proposal.
When the issuer looks good to go public, the BSEC gives the go ahead, allowing the fund collection from the primary market through book building or fixed price method.
Before the establishment of the securities regulator in 1993, the board of the Dhaka Stock Exchange (DSE) approved IPO proposals. The CSE was yet to be founded.
The responsibility then went to the BSEC. The role of the DSE shrank to giving opinions -- giving a "yes" or "no" to a proposal.
After 2010, the prime bourse began submitting observations about the financial indicators of the company that sought permission to get listed.
But on several occasions, the DSE claimed that its observations had not been paid heed to before an IPO was approved.
"It's not the job of the securities regulator to scrutinise IPO proposals and persuade companies into going public," said BSEC Chairman Prof Islam.
He said the BSEC had been handling IPO proposals since no one was putting in any efforts to improve the depth of the equity market.
He also cited the punishments handed down by the regulator on rogue auditors and blacklisting of some of those. The Commission had tried all means - requesting the government authorities for listing of state-run companies and big businesses for floating shares in the primary market - to develop the secondary market, added Mr Rubayat Ul Islam.
"Public criticisms imply that all responsibilities lie with the securities regulator. But nowhere does the regulator do the job of scrutinising IPO proposals.
"Now, it is the job of the stock exchanges to strengthen the market through listing of good companies." They will have to form marketing teams to make that happen.
"The regulator will see if rules and regulations have been followed in the jobs done by the stock exchanges," said the BSEC chairman.
The stock exchanges will also have to keep a watch on the movements of the secondary market. The boards and the exchanges' managements will respond to the questions raised over the index movements.
Representatives of stock brokers are on the boards of the stock exchanges. "So, they should oversee the secondary market," added Mr Islam.
When contacted, a DSE director acknowledged receiving the messages from the securities regulator. Preferring anonymity, the director said the exchanges would be bound to explain market behavior for now on.
"In fact, it's not the job of the securities regulator," he said. The BSEC will see whether there is good governance in the stock exchanges.
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