Stockbrokers play a big role as market intermediaries and so they must be made accountable for investors to regain confidence in the capital market.
Talking to the FE, several brokerage firms said public perceptions about brokers were not good because of a handful of organisations who had defrauded clients.
Though the companies, including Crest Securities and Tamha Securities, were prohibited from continuing their operations, thousands of investors are yet to be compensated and the fraudsters punished.
While the equity market has failed to attract investors because of the prolonged bearish outlook, the incidents of fund embezzlement and subsequent mitigation failures drove people away from the market, exacerbating the situation further.
Hence, changing people's perception is necessary for the market and its stakeholders to thrive.
The DSE Brokers Association (DBA), which represents brokers, has always been active when it comes to realising stockbrokers' demands but did not act against the corrupt practices of its members. Even the membership of any firm was never suspended or cancelled by the association for serious wrongdoings, including misappropriation of investors' funds.
Crest Securities and Tamha Securities still have their memberships and voting rights, according to sources at the DBA.
DBA President Saiful Islam said brokers' associations in other markets, such as Hong Kong, Singapore and Vietnam, have the role of a "semi regulator".
"But we are unable to do anything beyond giving suggestions. We need to be empowered to take measures against the members."
Having inherited a weak market structure and flawed regulatory management, the present securities commission has been putting emphasis on investors' safety in its reform plan.
Mohammad Rezaul Karim, spokesperson of the Bangladesh Securities and Exchange Commission (BSEC), acknowledged that stockbrokers along with other market intermediaries will have to be made accountable for the safety of investors.
He said the commission would work on recommendations from the task force that it formed to advise how to develop the market, which should address concerns tied to accountability.
Moreover, the BSEC recently formed inquiry committees to dig up malpractices of stockbrokers.
Now, no stockbroker is allowed to receive cash or withdraw funds from the consolidated customers' accounts (CCAs) without account payee cheques.
"Fund embezzlement will stop following stern regulatory actions," added Mr Karim.
Requesting for anonymity, a stockbroker said there is still scope of fraudulent means to move away funds from CCAs -- by issuing cheques to someone, who is not a client of the brokerage firm. The bank will only see whether there is fund in the account while disbursing the money. Mr Karim also said the regulator had issued an order for the introduction of un-editable back-office software. The exchanges will have to implement the order very soon.
A former chairman of the securities regulator, Faruq Ahmad Siddiqi said stockbrokers would not be able to function as intended without integrity and professionalism. The chief of Midway Securities, Md. Ashequr Rahman said that as part of his firm's professional commitment, it makes clients aware of the risk involved in investing in equity-based securities.
He said Midway Securities encourages clients to inject funds in risk-free Treasury bonds even though such investments do not benefit the broker much; the fund gets stuck and the broker cannot earn commission through trading in securities.
"A stockbroker has less return from services provided to a client who invests in Treasury bonds," said Mr Rahman, adding that the firm also recommends investing in selective stocks.
"Clients will stay with a broker for a long time if they feel their investments are secure."
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