BSEC seeks secure software system to prevent brokerage fund embezzlement

The Bangladesh Securities and Exchange Commission (BSEC) has called for a unified and highly secure back-office software system for all brokerage houses to prevent fund embezzlement and ensure timely refund of investors’ money, as the authorities have begun returning funds to thousands of investors affected by financial irregularities.

BSEC Chairman Masud Khan said the system should provide real-time information on brokerage houses’ bank accounts and Customer Consolidated Accounts (CCA), enabling daily reconciliation and quick detection of any shortfall or irregularity involving investors’ funds.

He made the remarks on Monday at the opening ceremony of the Investor Protection Fund (IPF) distribution organised by the Dhaka Stock Exchange (DSE) to distribute money among investors affected by embezzlement by brokerage houses.

Masud Khan said financial irregularities involving Tk492 crore at five securities houses had affected 17,967 investors, describing the figure as highly concerning.

He said the IPF has started returning money to affected investors in phases. Initially, investors with claims below Tk5 lakh will receive their full dues, while around 96 percent of affected investors fall into this category. Investors with claims above Tk5 lakh will also be covered gradually, he added.

The BSEC chairman said the compensation process was a collective effort by the BSEC, DSE, Investors Forum and other stakeholders.

He said the IPF was originally established to address settlement risks, but its practical importance had become evident in Bangladesh following incidents of investors’ money being embezzled.

Emphasising technology-based supervision, Masud Khan said discussions had already begun with the DSE on introducing “one unified back-office software” that would be highly protected and provide real-time data from brokers.

The system should allow regulators to verify regularly how much money a brokerage house has in its bank and CCA accounts, he said. Such digital monitoring would also reduce the pressure of direct regulatory supervision. He also stressed the need to move forward with an Order Management System (OMS).

DSE Chairman Mominul Islam said 17,332 of the 17,967 affected investors would receive their full dues up to Tk5 lakh from the IPF. The remaining investors would also be paid through legal measures as quickly as possible.

He apologised to affected investors for their financial and mental suffering and said BSEC, DSE, CDBL, brokerage houses and other stakeholders would work together to restore investor confidence.

Mominul said the IPF is mainly financed through brokers’ trading commissions and 25 percent of interest earned on CCA accounts. He said DSE had completed the difficult task of verifying the details, investments and final balances of the affected investors and hoped the fund distribution would be completed smoothly.

He also expressed hope that the positive trend in the capital market would strengthen further and help build a strong and transparent market as an important pillar of the economy.