Three Brokerage Houses Under Scrutiny

The Bangladesh Securities and Exchange Commission (BSEC) has taken a strict stance following allegations of irregularities in margin loan management in the country’s stock market. As part of this move, the regulator has decided to conduct on-site inspections of three brokerage houses that are members of the Dhaka Stock Exchange (DSE). It has also instructed the DSE to submit a detailed report after reviewing the institutions’ margin loan management, regulatory compliance, and overall operations.

The directive was issued recently through a letter from the Market Intelligence and Investigation Department of the BSEC to the Chief Regulatory Officer of the DSE.

The brokerage houses under inspection are Surma Securities Holding Company Ltd (Track No. 111), Gateway Equity Resources Ltd (Track No. 157), and Subvalley Securities Ltd (Track No. 168).

Officials said the investigation follows allegations of irregularities in margin loan management and violations of commission directives. BSEC Director and spokesperson Md. Abul Kalam confirmed the order to Agamir Somoy.

According to the commission’s observations, the firms concerned have not been properly complying with the Margin Rules, 1999, and a directive issued by the BSEC on May 20, 2022. The DSE had earlier sent an official letter to the commission on March 11 this year, reporting inconsistencies in margin loan operations along with information on renewal of stock-broker and stock-dealer registration certificates of the brokerage houses. The current action has been taken under Rule 17(1) of the Securities and Exchange Rules, 2020.

Market stakeholders said the main objective of the directive is to ensure transparency and risk control in margin loan management. Although margin lending is a key component of stock market transactions, misuse or violation of rules can create instability in the market. They added that regular inspections are essential to ensure transparency and compliance among brokerage houses. Any irregularities identified during inspections should be addressed with necessary action to protect investor interests and maintain market discipline.

Earlier in April, the BSEC also ordered inspections of 12 brokerage houses. These included Standard Bank Securities Ltd (Track No. 156), JKC Securities Ltd (Track No. 179), Ahmed Iqbal Hasan Securities Ltd (Track No. 114), Merchant Securities Ltd (Track No. 169), Globe Investment and Fintech Company Ltd (Track No. 189), Sheltech Brokerage Ltd (Track No. 120), Commerce Bank Securities and Investment Ltd (Track No. 180), New Era Securities Ltd (Track No. 150), Anwar Securities Ltd (Track No. 160), Trustee Securities Ltd (Track No. 162), Unicap Securities Ltd (Track No. 163), and Mona Financial Consultancy and Securities Ltd (Track No. 164).