Govt asks BSEC to step up coordination with relevant parties

The widely discussed disagreements between the Bangladesh Bank and the Bangladesh Securities and Exchange Commission (BSEC) over various issues seems to have come to the government's attention as the finance ministry has asked the stock market regulator to step up coordination with relevant parties.

The government has also asked the BSEC to strengthen surveillance and monitoring against suspicious transactions and share price manipulation through syndication in the stock market.

The Financial Institution Division of the Ministry of Finance sent a letter with six instructions to the chairman of the BSEC recently.

The instructions came at a time when the price indices of the Dhaka Stock Exchange (DSE) remained downward for the last two weeks over disagreement between the BSEC and the Bangladesh Bank over various issues that heightened tension among stock investors.

Earlier on 25 October, the Financial Institution Division sought clarification from the BSEC over reforming the board of Fareast Islami Life Insurance without informing relevant parties including the Insurance Development Regulatory Authority (Idra) and the Financial Institution Division.

In the latest letter, the BSEC was asked to increase monitoring over illegal entry or exit of any company and share transactions of the listed companies, business operations of which remained shut. 

Analysts have observed, junk stocks are dominating the market nowadays following the BSEC's series of moves to bring underperforming companies back on the track, through consultation, restructuring or delisting in cases of no hope for improvement.

For instance, despite having business operations closed, Shyampur Sugar Mills experienced an unusual hike in share price over 200% in one year till September last year.

Not only one, a list of 135 poorly performing low-cap listed companies in the stock market saw unusual price hikes during the same period.

The Bangladesh Bank prepared the list of junk shares which gained abnormal price hike and notified the BSEC several months back. 

In the latest letter sent by the Financial Institution Division, the BSEC was asked to bring the institutions involved in suspicious transactions under close monitoring and take legal action. The letter also asked to intensify its surveillance so that no unscrupulous syndicate can manipulate share price. 

Recently, the Bangladesh Bank has fined the new generation NRB Bank Tk49.50 lakh for manipulating the share price of a single company.

The bank was penalised after evidence of share price manipulation was found in an investigation conducted by the central bank.  

This is not only in one bank, top officials of some more banks were found involved in share price manipulation, creating price bubbles in the market, according to the central bank's findings.

The BSEC has surveillance, but it could not detect such a share manipulation of banks.

The overplay of banks in the stock market led the Bangladesh Bank to conduct an investigation and the central bank finally unearthed their involvement in share price manipulation.

The letter also addressed coordination issues among relevant parties as conflict between the Bangladesh Bank and BSEC is now the much discussed issue among stock market investors.

The conflict became vivid after the Bangladesh Bank had denied statements made by a BSEC representative to the media regarding the outcome of a recent meeting between the two regulatory bodies.

In a meeting held in November with the Bangladesh Bank, the BSEC raised the issue demanding that banks and non-bank financial institutions disburse dividends even after having accumulated losses.

The central bank did not agree with it, saying that it goes against the law.

But soon after the meeting, a BSEC representative briefed journalists that the central bank agreed to allow dividend payout with an accumulated loss.

On the very next day of their briefing, the central bank issued a press release denying the BSEC's statement.

For now, the BSEC and the Bangladesh Bank are in contradictory positions over the dividend issue.