Department of Cooperatives official Md Abul Khayer and his associates have been slammed with fines worth more than Tk 1.35 billion for manipulating share prices of four listed companies.
This is not the first time he has been found guilty of the crime. But every time fines were scanty relative to the profits he had made through corrupt means in the stock market and so the punishment could never deter him from repeating the illegal acts.
Mr Khayer, alias Hiru, was an influential investor in the market during the regime of former chairman of the securities regulator Shibli Rubayat Ul Islam.
He was well-known as a key market manipulator then. When he bought a stock, others followed suit as they knew it was a sure shot, said market sources.
The Bangladesh Securities and Exchange Commission (BSEC) at a meeting on Thursday, chaired by Chairman Khondoker Rashed Maqsood, decided to impose the hefty fine on Mr Khayer and accomplices as a deterrent.
Mr Khayer's family members -- his father Abul Kalam Matber, wife Kazi Sadia Hasan, other relatives and DIT Cooperative, which is owned by his family, have been penalized together.
He and his family members carried out serial trading to manipulate shares of Fortune Shoes, Delta Life Insurance, NRB Commercial Bank, and Sonali Paper and Board Mills between June and October 2021, a BSEC official told The FE.
An investigation by the Dhaka Stock Exchange (DSE) discovered the fraudulent activities committed by Mr Khayer and his allies.
Mohammad Rezaul Karim, BSEC executive director and spokesperson, said the securities regulator is working to clear pending issues of non-compliance facing issuers, market operators, and controversial investors.
"The BSEC wants to deliver a message that it will not be lenient with matters of non-compliance in a bid to restore investors' confidence.
"It's expected that the prompt regulatory actions will improve governance and restore investors' confidence," Mr Karim added.
How did Mr Khayer influence stocks?
Currently serving as a deputy registrar at the Department of Cooperatives, Mr Khayer traded in shares not only from his own portfolio but also from other beneficiary owner's (BO) accounts opened in the names of his relatives, family members, and social organisations. He controls all the accounts.
He had been fined several times for manipulating more than 20 companies.
For example, the BSEC fined Mr Khayer and his family members Tk 140 million in September this year for their involvement in illegal trading in 11 stocks in 2022.
However, their realised capital gains amounted to Tk 500 million, while unrealised gains were Tk 1 billion, according to reports of the BSEC enforcement department.
Realised capital gains refer to the profit made after selling shares, while unrealised capital gains mean the shares purchased are traded at higher prices in the market at present and are available for sale to make profits.
Earlier in September, the newly-formed commission fined the ousted goodwill ambassador, cricket star Shakib Al Hasan Tk 5 million for his links to manipulation of the stock of Paramount Insurance. He had earned more than Tk 9 million in capital gains from trading in the stock. He had gotten away with market manipulation during the regime of Mr Shibli.
Meanwhile, the final draft of White Paper on the state of Bangladesh's economy, published on Sunday, said trillions of money had been embezzled from the stock market through fraud, manipulation, placement shares, and IPOs.
Insignificant fines relative to the expected profits from manipulation encouraged the illegal acts, it said. Powerful investors and institutions had artificially inflated share prices through serial trading in violation of securities laws.
They targeted some stocks and created false impressions of active trading in the shares to gauge out profits by offloading overvalued assets.
Another BSEC official, requesting not to be named, said the same group of people had been committing violations of laws again and again. Some of them had been fined by the regulator but repeated crimes of similar patterns indicate that they did not amend themselves even after facing regulatory actions.
In other countries, including neighbouring India, there are instances of banning manipulators permanently from the market.
"The regulatory actions [by BSEC] definitely will be tougher in the days to come," the official said.
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