BSEC draft proposes tighter margin loans, stricter risk controls

 
The Bangladesh Securities and Exchange Commission (BSEC) has proposed sweeping amendments to the Bangladesh Securities and Exchange Commission (Margin) Rules, 2025 to strengthen discipline in margin financing, improve risk management and enhance investor protection in the capital market.

Under the draft rules, if an investor's equity falls below 50% of the outstanding margin loan, the margin financier will be allowed to sell the required securities without prior notice. The proposal also revises provisions relating to the definition of margin financing, eligible financiers, investor eligibility, margin limits, risk management, margin calls, forced liquidation and the selection of marginable securities.

The commission has invited comments, suggestions and objections from stakeholders within two weeks. It said the draft would be reviewed and revised where necessary before being finalised and published in the official gazette. BSEC also clarified that the document is only a draft proposal and urged investors not to be misled by speculation or incomplete information.

The draft allows only BSEC-registered stockbrokers, portfolio managers and full-fledged merchant banks to provide margin financing. Asset managers engaged solely in institutional fund management will not be eligible.

Each margin financier must maintain a separate bank account exclusively for margin financing operations. Investors will be allowed to maintain one cash account and one margin account with the same institution.

The proposed rules cap the margin financing ratio at 1:1, meaning loans cannot exceed an investor's equity. For listed life insurance shares, the ratio will be limited to 1:0.25. A financier's total margin exposure cannot exceed five times its core capital or net assets, whichever is higher.

The draft also requires financiers to maintain a two-member risk management committee and ensure that clients' equity remains at least 70% of the margin loan. If equity falls below that level, a margin call must be issued immediately, and no new financing can be provided if the shortfall is not corrected within three business days.

To qualify for margin financing, investors must hold at least Tk 300,000 worth of listed securities. Margin financing will not be allowed for Z, G or N category securities, or SME, ATB or OTC-listed securities. In addition, a single security cannot account for more than 20% of a financier's total margin portfolio or an individual client's margin-financed investments.