The task force recently formed by the securities regulator has been mandated to study the market and recommend necessary reforms, without a deadline.
While the lack of deadline and the weight of the responsibility have raised skepticism about the ultimate outcome of the initiative, members of the task force said they would initially focus on easily-achievable targets.
Several of them talked to The FE but requested for anonymity.
They put emphasis on gaining investors' confidence by restoring good governance in the market.
One of the initial jobs would be to ensure that sponsor directors together meet the requirement of minimum 30 per cent stake in the listed companies. The taskforce will recommend stringent punishment against those who have violated the provision, a member said.
The advisory committee will also investigate how the margin rules are being misused to the interest of vested quarters and suggest the maximum amount to be lent to a single client.
Market operators say big investors often manipulate stocks after borrowing a large sum of money. Lenders and borrowers even drive up stock prices working in collaboration and then offload overvalued shares to general investors.
Present margin rules should be scrapped altogether and new rules should be formulated to ensure that margin loans do not impact trading in stocks, said Md Ashequr Rahman, managing director of Midway Securities.
Margin loans should be allowed only to invest in fundamentally strong stocks, he added.
Mr Rahman also said stocks should not be categorized based on dividends. Rather, market cap or stocks' liquidity should be taken into consideration.
According to Md Moniruzzaman, managing director of Prime Bank Securities, changing the book building method should be given priority immediately.
"Because of the cap on share valuation during the bidding process of qualified investors, good companies feel discouraged from going public," he added.
In a meeting with the Chartered Financial Analyst Society on Wednesday, the chairman of the securities regulator cited three major barriers to the development of the market - the shrinking IPO (initial public offering) flow, unregulated mutual fund industry and negative equity.
Supporting the view of the chairman of the Bangladesh Securities and Exchange Commission (BSEC), Asif Khan, chief of EDGE Asset Management, said the task force should work on the three key areas first.
On October 6, the BSEC formed a five-member taskforce to recommend reforms to policies and rules that govern the capital market.
Given the magnitude of the responsibility of the task force, it may increase its strength with additional manpower in the future.
A member said the committee would prioritize amendments to public issue rules, rights issue rules, margin rules, debt securities rules, and investment sukuk rules. So, they will find loopholes and suggest reforms to plug those.
Preferring anonymity, another member of the task force, said they would also determine challenges in implementing the recommendations and determine how to overcome them.
The recommendations to be made by the committee are expected to improve the BSEC's institutional capacity, internal good governance, automation, and ensure information secrecy.
The market watchdog wants to ensure punishments of market manipulators and violators of insider trading rules by setting a specific penal code.
The task force will advise on how to make listed companies and market intermediaries accountable. It will also give its opinions in favour of or against the requirement of no objection certificates (NoC) to be issued before merger or acquisition.
The regulator looks to establish a state-of-the-art surveillance system based on recommendations of the task force. The committee will also unveil why the market has not grown keeping pace with the gross domestic product.
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