BSEC vows action, not words to restore investor confidence

Bangladesh Securities and Exchange Commission (BSEC) Chairman Masud Khan on Monday promised visible changes in the capital market within the next few months, saying investor confidence would be rebuilt through action rather than words.

“We have completed several reforms in the last two months. If we can implement the planned reforms in the next two months, investors will see visible progress,” Masud Khan said at a meeting with capital market stakeholders organised by the DSE Brokers Association of Bangladesh (DBA) at DSE Tower in Dhaka on the day.

He said the BSEC is moving ahead with direct listing, faster IPO rules and a hybrid listing system to bring more good companies to the stock market.
“Investor confidence will be restored through actions, not words,” he said.

Masud said the regulator does not want to control the normal movement of share prices or artificially push up the market index.

“Increasing the market index or turnover is not the job of BSEC,” he said, adding that the commission's main responsibility is to ensure a fair, transparent and disciplined market and protect investors.

He said the IPO process must be made faster, simpler and more transparent. At present, company documents pass through several layers of checking, making the process lengthy and discouraging many good companies from coming to the stock market.

The new approach will put greater responsibility on stock exchanges, while stronger auditing, better coordination and proper disclosure will remain important.

The BSEC chairman said the proposed direct listing system would allow eligible companies to enter the market by selling part of their existing shares without going through the full IPO process.

The regulator is also working on a hybrid system, under which a company could raise part of its capital through an IPO and list another portion directly.

Masud expects these reforms to bring more quality companies to the market. He said a stronger group of listed companies would help ordinary investors regain confidence and could also encourage foreign investors to look at Bangladesh again.

But he warned that reform does not mean allowing market manipulation.

A large buy or sell order by itself is not illegal, he said. However, repeated buying and selling in a pattern that amounts to serial trading would be investigated.

BSEC will continue inspecting brokerage houses, but the chairman said inspections would become more selective and include surprise checks, particularly where there are signs of irregularities.

He also said the new margin rules are now being followed more responsibly.

The chairman stressed that rebuilding the market is not the responsibility of BSEC alone. The BSEC, DSE, CDBL, brokers, listed companies, investors and media all have to play their part.

The meeting also exposed the depth of the problems facing the market.

Riad Mahmud, president of the Bangladesh Association of Publicly Listed Companies, said the energy crisis was no longer something to discuss only at seminars but had become a real problem for businesses.

He also criticised the growing influence of short-term day traders and called for faster action on direct listing, IPO reform and financing for listed companies.

Former DBA president Ahmed Rashid Lali said the 6,000-point level of DSEX had become a psychological barrier. 

Whenever the index comes close to that level, he said, even a small shock pushes it down again.

DSE director Minhaj Mannan Emon raised concerns over the quality of past IPOs, saying around 150 of 200�"300 IPOs could be considered “red flags”.

Another DSE director, Richard D Rosario, pointed to the fall in investor participation. He said the number of BO accounts had declined from around 32 lakh to about 15 lakh.

DSE Chairman Mominul Islam said script netting or intraday trading could be introduced this year, while DSE Managing Director Nuzhat Anwar said the exchange is working on several operational and technological reforms.

The message from today's meeting was therefore clear: the market does not need only a temporary rise in the DSEX. It needs better companies, faster rules, stronger surveillance and greater investor trust.