BSEC forms capital market reform taskforce

The Bangladesh Securities and Exchange Commission (BSEC) has formed a taskforce to get recommendations for the needed reforms in the capital market.

Dhaka University professor of economics Mohammed Helal Uddin, Dhaka Stock Exchange's former managing director KAM Majedur Rahman, former president of the Institute of Chartered Accountants of Bangladesh AF Nesaruddin, BUET professor of computer science and engineering Md Mostofa Akbar and Dhaka University associate professor of accounting and information system Al-Amin have been made the taskforce members.

The taskforce, starting its work immediately, will have in-depth consultation with all stakeholders and submit their report within a reasonable time, according to the BSEC.

The purpose includes the overall development of the capital market, boosting investors' confidence and taking the capital market governance to the international level, it said.

The market regulator itself and all intermediaries will provide the necessary information and other assistance to the taskforce. The BSEC will be providing the secretarial support to the taskforce while the regulator may add taskforce members later.

The taskforce will form a wide range of focus groups to get their reform recommendations.

Terms of reference

The taskforce has got 17 initial terms of reference (TOR) that can be widened later, according to the BSEC.

The TOR starts with identifying the reasons behind the poor size of the capital market compared to the GDP and making policy proposals for the financial sector for improvement.

The list includes making recommendations for ensuring BSEC representation during the government's financial policy formulation and making policy decisions so that bank dependency for long-term financing decreases and the capital market can play a bigger role.

Analysing the present situation and identifying major challenges the taskforce will make recommendations to take the capital market governance standards to the international level.

Recommendations to strengthen the institutional capacity of the BSEC, to ensure its internal good governance, technology application and automate the regulator's internal activities, ensure the secrecy of information, an administrative structure within the BSEC in line with that in the other developed and developing countries, skill development for the regulatory officials also have been included in the terms of reference.

The list of recommendations BSEC seeks from the taskforce include how to adopt international standards for better monitoring of the two bourses, the central depository and central counterparty companies alongside ensuring the institutions' transparency, accountability and governance.

Modernising the capital issue rules for issuance of equity securities through private placements.

Listed firms' transparency, accountability, corporate governance, disclosures and the accuracy of audited financial statements to protect investors and increase the market depth.

Outlining the responsibilities and scopes for punishment in cases of violations by relevant professional service providers including issue manager, underwriter, valuation provider, and auditor alongside the issuer of debt and equity securities so that the responsible ones for submitting false or inappropriate information, documents, reports face the music.

Modernising the regulations to ensure market intermediaries — merchant banks, broker-dealers and asset managers.

The rules for issuing debt and equity securities through public offers will also be upgraded to be in line with the present contexts.

Guidelines for regular consultation and coordination with the stakeholders to protect the interest of investors and boost their confidence.

Adding a specific penal code or regulation for punishments for market manipulation, insider trading and other irregularities.

Modernising the rules for margin loans, risk management strategies, online-offline surveillance and monitoring systems having artificial intelligence and business intelligence modules alongside evaluating the effectiveness of the monitoring systems for needed reforms.

Strategy for attracting both local and foreign investors through evaluating the present market structure and increasing the market depth, liquidity and product diversity.

Improving capital market governance and investors' confidence through automation that will need technological innovation and development, introduction of appropriate Fin-Tech, and cyber security.

Having recommendations for a standard operating procedure to coordinate with the other regulators including Bangladesh Bank, Insurance Development and Regulatory Authority, Microcredit Regulatory Authority, National Board of Revenue and the Registrar of Joint Stock Companies and Firms.

Also, the taskforce will recommend on how to make BSEC's nod a must before the high court approval of mergers, amalgamations and acquisitions of listed companies with any other listed or non-listed ones.