The Dhaka bourse is developing software to monitor investors' funds and shareholding positions in real time, in a bid to curb corrupt practices by brokers involving consolidated customer accounts (CCA).
Once the DSE-iMON (Integrated Monitoring Platform) is installed, the bourse will be able to detect any unauthorised movement of funds from the CCA - a bank account maintained by brokers - by cross-matching investors' deposits with shares purchased in their BO accounts.
The premier bourse has designed the features of the software and an internal team is now working to develop it.
"Our board has approved the project at a recent meeting. The software is likely to be installed by December this year," said DSE Managing Director Nuzhat Anwar.
The initiative comes against the backdrop of repeated incidents of misappropriation of investors' funds by brokers. Funds had been siphoned off from CCAs long before the regulatory bodies could learn about the financial frauds.
Thousands of investors are yet to receive their hard-earned money embezzled by five brokerage firms, including Tamha and Mashihor Securities.
DSE-iMON will cross-check data across brokers' back-office systems, banks, the Central Depository Bangladesh Ltd. (CDBL) and the Dhaka bourse. It will automatically send an alert if there are anomalies in the data. On receipt of the alert, the DSE will verify the status of the CCA with the help of the bank with which the account is maintained.
Currently, the DSE is not allowed to check CCAs opened with scheduled banks.
"The DSE will need indemnity from brokers to check the bank accounts," Ms Nuzhat said.
A majority of brokers have agreed to allow the DSE to scrutinise their bank accounts following any abnormal transactions.
Under the existing reporting framework, every TREC (Trading Right Entitlement Certificate) holder is required to submit a report on its CCA status to the DSE on a monthly basis. The reports are unaudited and the DSE has no scope to verify if the reports, prepared on company letterheads, are authentic.
Sources at the DSE said there were times when they found such reports to be inaccurate.
For example, a broker once showed a shortfall of investors' money worth around Tk 70 million in its CCA, but the amount was later found to be more than Tk 200 million in an investigation.
The sources said that initially some brokers opposed the idea of installing DSE-iMON. They were convinced when told that they would no longer have to prepare reports on CCA with the software in place.
The existing regulatory oversight often remains incomplete and any action to protect investors is often delayed. The DSE-iMON system will bring solutions through continuous monitoring of investors' CCA balances and shareholding positions.
The information regarding CCA balances will be cross-checked with the help of banks.
The system is therefore expected to enhance transparency, improve compliance monitoring and enable early detection of irregularities.
DSE-iMON has been conceptualised as the prime bourse sought a technology-driven solution.
The DSE has a mandate to see if TREC holder companies comply with securities laws and regulatory directives, said Ms Nuzhat. DSE-iMON will help ensure continuous monitoring instead of periodic inspections, enabling earlier detection of irregularities and compliance issues.
As encrypted data will be matched automatically, the platform will improve investors' data privacy while minimising human access to sensitive investor information.
The exchange's integrated platform will also reduce dependency on manual inspections, spreadsheets and ad hoc investigations, allowing regulatory staff to focus on high-risk cases.
The prime bourse will grade brokers using the technology based on the extent of their compliance. Brokers obtaining good marks will face less scrutiny while highly non-compliant brokers will come under frequent investigations.
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