BSEC forms body to look into Active Fine’s irregularities

Infographic: TBS

The Bangladesh Securities and Exchange Commission (BSEC) has formed a three-member committee to investigate alleged financial irregularities at Active Fine Chemicals Ltd, a publicly listed supplier of bulk drug materials.

The committee, announced by BSEC Executive Director Mohammad Rezaul Karim, consists of BSEC Additional Director Mohammad Al Masum Mirdha, Deputy Director Md Nanu Bhuiyan, and Assistant Director AKM Faruk Alam. They have been tasked with submitting their findings within 60 days.

According to BSEC officials, Active Fine Chemicals has been involved in several regulatory violations in recent years. These include non-compliance with the requirement for sponsor-directors to hold a minimum 30% shareholding, the issuance of qualified opinions by statutory auditors on certain elements of the company's accounts, failure to publish mandatory financial disclosures, not holding the annual general meeting for shareholders, and a significant decline in its financial performance. The inquiry aims to identify and address these issues comprehensively.

According to the commission, the enquiry committee will assess the financial statements of Active Fine Chemicals to determine whether they accurately reflect the company's performance and financial position. 

It will specifically examine discrepancies in the reporting of revenues, profits, and expenditures and investigate the causes behind declining trends in the company's earnings per share and dividend payouts over the past five years.

The committee will conduct a detailed review of the company's governance, compliance, and financial practices. This includes analysing the company's dividend policies and payments over the last five years to ensure alignment with shareholder expectations and regulatory requirements, as well as investigating potential misappropriation or diversion of profits. 

The committee will evaluate adherence to the BSEC's Corporate Governance Code, including the mandatory 30% shareholding requirement, and assess the role of the board of directors, audit committee, and top management in ensuring compliance and oversight. 

It will identify all related party transactions over the past five years and examine compliance with AGM requirements, including failures to conduct AGMs within the statutory timeline and their impact on shareholder rights. 
Furthermore, the committee will assess the effectiveness of internal controls in financial management, operational efficiency, and regulatory compliance.

Additionally, the committee will review the role and performance of external auditors and evaluate the company's initiatives to protect investor interests and its adherence to obligations under BSEC regulations. 

Based on its findings, the committee will provide actionable recommendations to address identified gaps in governance, compliance, and financial reporting, with the aim of improving the company's overall accountability and governance.

Active Fine Chemicals has failed to publish any financial disclosures since April 2023, leaving investors in the dark about its financial condition. As a result, shareholders have no clarity on the company's current financial performance or overall health.

TBS attempted to contact the managing director and the company secretary by phone to seek comments on the company's overall issues. However, the managing director did not answer the call, and the company secretary's phone number was unreachable.

Active Fine Chemicals, which was listed in 2010, is the first local firm to produce active pharmaceutical ingredients, an important intermediary raw material for medicines. Initially, the company was well-regarded by investors for its alignment with the government's vision to establish a strong backward linkage in the rapidly growing pharmaceuticals industry. 

However, years of struggling to secure tax breaks due to procedural complexities, coupled with mounting questions regarding the company's financial accounts, have diminished its appeal in the stock market. Over the past five years, the company's profits have drastically declined, and it now alternates between reporting losses and meagre profits.