After a series of scams by brokerage firms, the securities regulator has decided to tighten oversight of investors' assets digitally to eliminate the risk of fund misappropriation.
First, the Bangladesh Securities and Exchange Commission (BSEC) will make it mandatory for brokerage firms to use certified non-editable back-office software. This is a significant move in the prevention of further scams because brokers have used unauthorised or duplicate back-office systems to manipulate records and conceal the actual status of clients' accounts while siphoning off their securities and cash.
The Dhaka Stock Exchange (DSE) has seven approved back-office software vendors listed on its website. Brokerage firms must use software designed by any of the vendors. Their digital platforms are meant to prevent editing of transaction records, thereby narrowing the scope of generating fabricated account statements.
As per the plan to prevent future scams, the DSE will be mandated to ensure that brokers comply with the requirement.
It remains unclear how many brokerage firms are still using unauthorised or non-certified back-office software despite the existing rules.
Second, the market watchdog is planning to introduce a real-time notification system that will instantly alert investors to every transaction involving shares and funds in their portfolios. That will allow them to detect fraudulent attempts instantly.
The BSEC plans to instruct the Central Depository Bangladesh Limited (CDBL) to ensure that all investors' e-KYC information is updated. It also intends to have CDBL develop a mobile application that will provide investors with real-time updates on their shareholdings, enabling them to verify their portfolios at any time.
Third, there will be automated reconciliation of transaction data between agencies and different platforms to eliminate the chance of data manipulation.
At present, brokerage firms use two separate software systems - an Order Management System (OMS) and a back-office system. The OMS executes buy and sell orders, while the back-office software maintains records of clients' shareholdings.
After trades are executed, the information is uploaded to brokers' back-office systems and transmitted to the Central Depository Bangladesh Limited (CDBL), which updates investors' securities accounts.
The BSEC now wants to eliminate this time lag through an automated reconciliation mechanism to avoid data discrepancies.
"Automated reconciliation must take place between CDBL and back-office platforms through an API connection to ensure there are no discrepancies," said BSEC Executive Director and spokesperson Abul Kalam.
He also said clients' funds should be reconciled automatically with banks. "There must be automated reconciliation between the balance in the Consolidated Customer Account (CCA) maintained with the bank and clients' account records in the brokerage's back-office system," Mr Kalam said.
Protecting investors from brokerage fraud has become the regulator's top priority following the discovery of another major scam, in which Salta Capital allegedly misappropriated nearly Tk 1 billion worth of investors' shares and funds, said the BSEC spokesperson.
The securities regulator also plans to strengthen the verification of client information to ensure that every investor's account contains accurate and authentic records.
It will ensure that key details, including mobile numbers, email addresses and National ID (NID) information, are properly verified so that brokerage firms cannot alter them without authorisation and that genuine investors receive instant transaction alerts.
"Every Depository Participant (DP) will be required to inspect and certify that clients' information, including mobile numbers and email addresses, is accurate and up to date," said Mr Kalam.
The information will be cross-checked by CDBL. The platform that the depository authority will develop will provide investors with instant access to their securities accounts, allowing them to verify their holdings in real time and detect any unauthorised changes promptly.
The CDBL's mobile app will enable BO account holders to view their security holdings directly at any time and verify them against statements provided by brokerage firms, said Mr Kalam.
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