Trading at Tradecap Stock Brokerage was suspended on Monday because the securities regulator did not respond to its licence renewal application when the Dhaka bourse sought clearance.
The brokerage firm said it had worked for nine months to ensure compliance with regulatory requirements for the renewal of its broker-dealer licence, but all efforts went in vain.
As its licence expired on Sunday, the Dhaka Stock Exchange (DSE) had to halt all operations of the brokerage firm, including trading, the next day, catching about 22,000 BO (beneficiary owner's) account holders off guard.
A source at the DSE, wishing not to be named, said the bourse had thoroughly checked all the documents submitted by the broker and then sent them to the Bangladesh Securities and Exchange Commission (BSEC) for permission to renew the licence.
"But the DSE did not receive any clearance from the regulator by Sunday. So, the premier bourse was bound to suspend the company's trades," said the DSE official.
Until the filing of the report, the BSEC had not issued any statement formally disclosing why it did not grant permission for the licence renewal.
Asked whether there were any irregularities, including deficits in the company's CCA (consolidated customers' account), the acting chief executive officer (CEO) of Tradecap Stock Brokerage, Md. Ariful Hoque, claimed that their CCA had never had any deficit.
"Our net capital has never turned negative. And there is not a single BO account [under the broker] with a negative balance," he said.
A senior official of the securities regulator, who also spoke on condition of anonymity, hinted that non-payment of punitive fines by one of the owners of Tradecap Stock Brokerage - formerly Anwer Khan Modern Securities - was the reason why the licence had not been renewed.
Elaborating further, Mr Hoque said one of the broker's four owners - Abu Sadat Md. Sayem - had been penalised over allegations of manipulating the stock of BD Finance. Mr Sayem had received a stay order from the upper court on the imposition of fines.
"That's a separate issue. Is it rational to put the renewal of the licence on hold because of the individual fault of the owner, which is also a sub judice matter?" Mr Hoque posed the question.
"The regulator did not even cite any reason for withholding the licence renewal," he added.
Mr Hoque also expressed fear that clients of the broker might get violent over the suspension of trades.
Earlier, the BSEC had rejected the licence renewal request of Beximco Securities.
Over concerns regarding investors' assets, a BSEC official said clients of brokerage firms could transfer their securities to another brokerage through link accounts.
Conflicting statements over ownership change
The ownership of Anwer Khan Modern Securities, which was later renamed Tradecap Stock Brokerage, was transferred in August last year to five new shareholders, including Md. Aminul Haque, managing director of listed Sea Pearl Beach Resort & Spa.
The other owners are Abu Sadat Md. Sayem, Mahjabin Hawque Masha, Md. Ashikur Rahman Azad, and Pinkey Rahi Shum.
Tradecap's CEO said shareholder Md. Aminul Haque left the company, transferring his stake in October, after the DSE raised an allegation that he did not have clearance from the CIB (Credit Information Bureau).
The source at the BSEC said the Demutualisation Act does not allow the transfer of ownership of a brokerage firm.
DSE Managing Director (acting) Mohammad Asadur Rahman, however, said the act forbids the transfer of TRECafter five years have elapsed since demutualisation.
But there is no bar on ownership transfer, and therefore a company's TREC with other assets and liabilities can be transferred to new owners.
The new owners of Anwer Khan Modern Securities received a no-objection certificate (NOC) from the DSE in November last year to change the name to Tradecap Stock Brokerage.
After completing relevant formalities, including submitting additional documents to the DSE and the BSEC, the company received its TREC (trading right entitlement certificate) in the new name in April this year.
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