Regulate where necessary, simplify where possible: BSEC chief vows to end 'paper age', 'regulatory love letters'

In a sweeping commitment to modernise Bangladesh's capital market, the newly appointed Chairman of the Bangladesh Securities and Exchange Commission (BSEC), Masud Khan, has vowed to dismantle the "analog hurdles" and "bureaucratic pains" that have long stifled the country's bourses. 

Addressing a meet-and-greet programme organised by the DSE Brokers Association of Bangladesh (DBA) on 2 July at the DSE Tower, the BSEC chief promised to transition the market into a digital-first, transparent, and vibrant ecosystem.

His vision rests on a fundamental mantra: "Regulate where necessary and simplify where possible." From ending the culture of paper-based trade orders to introducing condensed quarterly reporting, the Chairman's roadmap signals a decisive shift toward deregulation and institutional empowerment.

Ending the 'analog' risk

One of the most significant reforms announced is the total digitisation of share trading orders. Masud Khan sharply criticised the existing practice where clients sign physical papers to authorise traders, often leading to unauthorised sales and misappropriation of funds.

"Our current share buy-sell orders are still paper-based. Clients sign a paper without even verifying what is written, giving traders the power to move their assets. Later, we see disputes where shares were sold against the client's will," Masud Khan observed.

"This analog system must end. We will introduce a system where clients place their own orders digitally, as is the global standard. Once we stop the analog method, no one will be able to embezzle investor funds."

Stopping the 'love letters'

Drawing from his 45 years of corporate experience, including his tenure as CFO of LafargeHolcim Bangladesh, Khan empathised with the "pain" of compliance reporting. 

He noted that currently, listed companies are often harassed with dozens of queries – which he jokingly referred to as "love letters" – from both the DSE and BSEC after every quarterly submission.

"I have carried this pain with me to this office. Today, I stand here to say this pain will stop," Khan declared. He announced that the BSEC will introduce IAS 34 (Interim Financial Reporting) to allow for "condensed" quarterly reports. 

"Beyond IAS 34, no additional queries will be sent for quarterly results. Detailed reporting will only be required for annual statements. We want to reduce the burden on companies so they can focus on growth," Masud Khan stated.

Illustration: TBS

IPO and bond market: Breaking the stagnation

Addressing the long-standing drought of quality listings, the BSEC Chairman acknowledged that current IPO rules are far from "friendly." He compared the ease of securing a bank loan within three months to the years-long, exhausting process of going public.

"I know the pain of the IPO process. We are going to simplify these rules significantly through amendments," he said, adding that he would soon meet with the Institute of Chartered Accountants of Bangladesh (ICAB), the stock exchanges, and the Bangladesh Merchant Bankers Association (BMBA) to streamline the process.

Regarding the bond market, Khan questioned why corporate bonds are not getting listed or traded. He attributed the failure to "abnormally high" listing fees and promised to slash costs to encourage trading. "If we want a fixed-income option, it must be traded so people can decide its value. Corporate bonds need to be part of the daily market activity."

Legal reforms and the 'junk' share ghost

Masud Khan also highlighted a major technical flaw in the Capital Market Tribunal, which currently forces cases through civil courts before they can reach the tribunal, rendering the body ineffective. "We are amending the law so that capital market cases can be filed directly with the tribunal, ensuring swift justice," he said.

In a stern warning to market manipulators, the chairman noted that currently, the shares that "keep jumping" are often junk stocks of closed companies. To combat this, he announced the imminent launch of a robust, real-time integrated surveillance system between the BSEC, DSE, and CDBL. 

"There will be triggers to halt and release trading automatically. This is the only way to control the 'uninformed, illiterate' speculation that dominates the floor today," he added.

Brokers push for netting and the 'FINRA' model

The DBA leadership, led by President Saiful Islam and Senior Vice President Moniruzzaman, presented their own set of demands to align with the BSEC's reform agenda. A primary concern was the Member Margin Requirement. Currently, brokers are forced to maintain margins based on gross "buy" amounts with the stock exchanges, regardless of their "sell" volume.

"The settlement is done on a net basis, but we are burdened with margins on a gross basis. This forces us to borrow hundreds of crores from banks unnecessarily," Moniruzzaman explained. He also urged the DSE to align with the Chittagong Stock Exchange (CSE) in accepting cheques as valid instruments for trading.

DBA President Saiful Islam called for a long-overdue review of the 2013 Demutualisation Scheme to further empower the exchanges. He also proposed a transformative shift for market intermediaries: the creation of a Self-Regulatory Organization (SRO), similar to the US FINRA or Japan's JSDA models.

"We want the BSEC to focus on policy while a separate body monitors and governs market intermediaries. This would reduce the regulator's burden and take our market to the next level," Saiful Islam said. 

He also voiced a shared sentiment that the BSEC should never again be involved in "so-called roadshows," as seen under the previous regime.

A sustainable future

The programme concluded with remarks from DSE Chairman Mominul Islam, who urged for "investment-friendly regulations" while stressing that the industry must also develop its own internal capacity to comply with new standards. 

Riad Mahmud, President of the Bangladesh Association of Publicly Listed Companies (BAPLC), added that the limitations on the utilisation of IPO proceeds should be withdrawn to allow companies operational flexibility.

Masud Khan ended the session with a pledge of action: "We want this capital market to grow sustainably, not through artificial booms. We are not just here to listen; we are here to execute. We will do it together."