BSEC investigates loan-funded directorship transition at Southeast Bank

The Bangladesh Securities and Exchange Commission (BSEC) has launched a probe into allegations concerning an individual's transition to the directorship of Southeast Bank through the acquisition of shares obtained via a loan from the same lender, and the transfer of the bank's funds elsewhere under the guise of pre-placement.

Allegedly, Southeast Bank provided a Tk200 crore loan to BLI Capital, a subsidiary of Bay Leasing, a listed firm. Raiyan Kabir, using Tk15 crore from the loan, purchased 2% of Southeast Bank's shares worth Tk25 crore, subsequently becoming a director. 

Raiyan Kabir, the son of the bank's chairman, Alamgir Kabir, however, no longer holds the directorial position.

The Business Standard contacted Kabir for a comment on the issue, but he declined to comment as he is out of the country. 

The BSEC has formed an investigation committee to look into these allegations and submit a report within 60 days. 

This committee will also address concerns related to unauthorised appointments and fund misuse in pre-placement shares.

It is to be noted that the Bangladesh Bank had drawn attention to this matter in a letter to the BSEC chairman last year, urging action. Following the discovery of loan approval violations and misuse, the Bangladesh Bank fined the then managing director Kamal Hossain Tk1 lakh in December.

Raiyan Kabir owned 25,437,294 shares of Southeast Bank by December 21, 2022. 

He served as a director until June 2022, having purchased 24,458,937 shares in 2020 and being appointed as director on 28 October of that year.

The BSEC sources told The Business Standard that Southeast Bank issued five pay orders worth nearly Tk15 crore from 1 to 7 September 2020 against the Tk200 crore BLI Capital loan. Using these funds in October 2020, Raiyan Kabir acquired the necessary number of shares to secure a director's position.

Additionally, Southeast Bank purchased 1.5 crore shares of EMI Power Limited as pre-IPO placement for Tk22.50 crore, including Tk7.50 crore in premiums. Such investments of over Tk1 crore require prior management committee approval, which was overlooked.

This matter requires thorough investigation as the transfer of Tk22.50 crore without proper authority approval raises questions about market discipline.

Raiyan Kabir initiated his banking career at Southeast Bank in 2004, working in the treasury department and international division, as per bank records. Despite a May 2021 circular from the Bangladesh Bank restricting bank employees from becoming bank directors, Raiyan Kabir maintained his directorship, serving on the audit committee since September 2021, as indicated in the bank's 2021 annual report.

In May last year, Raiyan Kabir was compelled to resign from the board following the circular's guidelines.