Appointments of 2 Dhaka bourse independent directors questioned

Questions have been raised by shareholders of the Dhaka Stock Exchange (DSE) regarding the recent appointment of two independent directors by the Bangladesh Securities and Exchange Commission (BSEC), citing that the appointments may not fully comply with established regulations.

The shareholders alleged that the BSEC appointed seven independent directors to the DSE board on 2 September, disregarding their proposed candidates. 

Specifically, they questioned the appointments of KAM Majedur Rahman, a former managing director of the bourse, and Nahid Hossain, an additional secretary at the financial institutions division of the Ministry of Finance.

A group of shareholders pointed out that, according to the Dhaka Stock Exchange (Board and Administration) Regulations 2013, a person cannot be considered an independent director if they have had a business relationship with the stock exchange – either directly or indirectly – as a partner, substantial shareholder, or director of an entity with such a relationship in the preceding three years. 

The regulation also disqualifies anyone with ties to TREC holders, shareholders of the stock exchange, or its directors, or anyone who has been an employee of a regulatory body.

They noted that KAM Majedur Rahman served as a director at AK Khan Securities from December 2020 to 4 October 2022 and is currently the CEO of AK Khan and Company Ltd, the owner of AK Khan Securities. 

Also, they pointed out that Nahid Hossain's role as an additional secretary in the financial institutions division, a government body with regulatory functions, should disqualify him from being an independent director.

The BSEC, however, clarified that Majedur Rahman was a nominated director at AK Khan Securities, which exempts him from the restrictions outlined in the regulations. They also said that the financial institutions division does not function as a regulatory body, thus not affecting Nahid Hossain's eligibility.

BSEC Director and spokesperson Farhana Faruqui told The Business Standard that the regulator appointed the independent directors in line with existing rules and regulations, adding that there is no conflict of interest in these appointments.

In a statement on Sunday evening, the BSEC further explained that it usually approves the list of independent directors recommended by the DSE's Nomination and Remuneration Committee (NRC), which is currently non-operational following the resignation of all its independent directors.

Saiful Islam, president of the DSE Brokers Association (DBA), said, "We are not legal experts, so we cannot provide a legal interpretation. However, if there are allegations of a legal dispute regarding someone's appointment, the BSEC must provide a legal explanation on the matter. If that's not possible, then an alternative measure must be taken to maintain market confidence."

He added, "To uphold market confidence, we want to remain above any controversy. No party should take any steps that could undermine trust."

The DBA, in a letter to the finance adviser on Sunday, called for reforms in the Stock Exchange Demutualization Scheme, which was enacted a decade ago. DSE shareholders believe they should have an equal voice on the bourse's board.

The demutualised DSE has 13 board seats: four for shareholder directors, one for the strategic investor, one for the managing director, and seven for independent directors, who are recommended by the DSE NRC and approved by the BSEC.