Trading of Defunct Companies' Shares to be Suspended
Masud Khan, Chairman of the Bangladesh Securities and Exchange Commission (BSEC), speaks at the ‘CMJF Talk’ event organized by the Capital Market Journalists Forum (CMJF). Photo: Agamir Somoy
Action will be taken to halt the trading of shares of companies whose production or business operations have been shut down for a long period, announced Masud Khan, Chairman of the Bangladesh Securities and Exchange Commission (BSEC). He said, "No mature stock market in the world allow trading of shares of defunct companies like they do in our country. Therefore, necessary measures will be taken to suspend the trading of such companies' shares in the interest of investors."
He made these remarks today, Thursday, at the "CMJF Talk" event organized by the Capital Market Journalists' Forum (CMJF) in the capital. The event was attended by CMJF President Monir Hossain, General Secretary Ahsan Habib Russell, and other members of the organization.
Masud Khan noted that the Dhaka Stock Exchange (DSE) is a primary regulatory institution for market surveillance. However, even if there was an abnormal fluctuation in share prices, it previously had to wait for BSEC's approval to take action, allowing irregularities to continue in the meantime. To change this situation, the DSE has now been granted the authority to take immediate or real-time action. Additionally, the power to determine circuit breakers has also been handed over to the stock exchange. He added that such deregulation is vital for the interest of the market.
Reflecting on assuming his role, the BSEC Chairman said, "This is an institution where almost everyone who came has faced criticism in one way or another. For this reason, I was initially reluctant to take up the responsibility. Later, when I saw that the government was sincere about stock market reforms and I was assured the independence to work freely, I decided to accept the role after discussing it with my family."
Drawing from his experience in multinational corporations, Masud Khan mentioned that he believes in plan-based management. "We spend 80 percent of our time planning and 20 percent executing. Even before joining BSEC, I spent three months studying and planning for the country's stock market," he said.
Prioritizing the mutual fund sector for the development of the stock market, Masud Khan emphasized that the depth of the market will not increase unless mutual funds grow. Most retail investors lack the capability to analyze or select good companies. Therefore, in line with international practices, initiatives are being taken to introduce Financial Advisor certifications in the country. At the same time, work is underway to amend the Mutual Fund Rules, Margin Rules, and Public Issue Rules.
He further noted that a company currently has to wait a long time and submit a massive volume of paperwork to launch an IPO. On the other hand, bank loans can be obtained much faster, which deters many good companies from joining the stock market. Because of this, the IPO process will be made simpler and more streamlined.
The BSEC Chairman shared that in the future, large and well-governed companies like Unilever and Incepta will be given the opportunity for direct listing. Currently, only state-owned companies can opt for direct listing by offloading 25 percent of their shares. However, under the new policy, all types of companies will be eligible for direct listing by offloading just 10 percent of their shares.
Masud Khan noted that the existing margin loan rules contain so many conditions that it has become difficult for investors to obtain margin loans. A draft of the amended regulations will be published by next week. Once officially published in the gazette, securing margin loans will become much easier for investors.
Reflecting on his actions after taking office, Masud Khan also highlighted the decision to withdraw the controversial floor price. He stated that despite facing criticism, the decision was necessary to restore normalcy to the market. At the same time, to safeguard the country's image in the international arena, initiatives have been taken to prevent the delisting of Beximco Pharmaceuticals from the London Stock Exchange.
He also announced that steps have been taken to transition share trading settlement to the T+1 system, a long-standing demand of market stakeholders. Work is currently underway with Bangladesh Bank regarding this matter.
Emphasizing that legal amendments are being pursued to ensure effective punishment for market rule-breakers, the BSEC Chairman said that although the commission currently imposes fines or penalties, these cases get stuck in court in most instances. As a result, while the previous commission imposed around 1,500 crore BDT in fines, only 33 lakh BDT was actually recovered. To change this situation, initiatives are being taken to form a special bench in court and to allow cases to be filed directly with the Capital Market Tribunal.
