Victims of embezzlement of stock brokers have not received any benefit from the Investors' Protection Fund of the Dhaka Stock Exchange (DSE) even after it was brought under the demutualisation scheme in 2014.
The fund has been left unused and inadequate. Contribution from the exchange, stock brokers and other possible funds has remained insignificant.
"So far, no portion of the Fund has been utilized, and its trustee board recently took an initiative to use a portion for the sake of investors," said a senior DSE official preferring not to be named.
Officials of the securities regulator say the existing balance, Tk 181.20 million, does not match with the amount estimated to lessen the sufferings of the affected investors.
They say the exchange and stock brokers have not transferred cash into the Fund as needed to comply with the regulations.
This is the backdrop to the Bangladesh Securities Exchange Commission (BSEC) forming an inquiry committee last month to dig out why the Fund had failed to protect investors and to find the people responsible for this.
The committee is supposed to submit a report within 60 days since June 26.
The sole purpose of the Fund is to protect investors in case of default by TREC (trading right entitlement certificate) holders.
For example, three stock brokers embezzled an aggregate amount of Tk 3.94 billion of their clients after the Covid outbreak. Their clients are yet to get back their money.
According to DSE officials, the Protection Fund size will expand to Tk 210 million by the end of this month. Still, the amount falls far short of what needed.
Under the demutualisation process, the DSE sold 25 per cent of its stakes at a price of Tk 22 per share to a Chinese strategic partner.
Each TREC holder received Tk 37.84 million against their 25 per cent holdings sold. Among the 250 shareholders, no claimant was found of the stakes of five shareholders of the DSE.
The five shareholders had received trading licence at the time of the formation of the premier bourse in 1954.
In absence of any claimant, the DSE received Tk 189.2 million against the stakes of the five shareholders. The money plus dividends, distributed by the DSE that the shareholders were entitled to, amounts to Tk 320 million. This fund is with the DSE but it is supposed to be transferred into the account of the Protection Fund.
Meanwhile, the DSE recently suggested using the Tk 320 million meant for compensating investors for IT development of the prime bourse.
Insiders said the securities regulator rejected the DSE's proposal at a meeting at the end of June.
The DSE is also bound to pay 0.50 per cent of the quarterly listing fee to the Protection Fund.
TREC holders, other than the shareholders who had got their trading licences before the demutualisation, are required to contribute Tk 0.1 million each to the Protection Fund.
The premier bourse has so far issued 59 TREC licenses and an aggregate amount of Tk 5.9 million should come from them to the Fund.
The BSEC inquiry committee has been asked to scrutinise the inflow of cash into the Protection Fund from the stipulated sources and if accrued interest were deposited into the Fund.
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