BSEC moves to overhaul merchant banking rules after 30 years
The four-member committee has been given 30 working days to propose amendments covering licensing, financial capacity, risk management and merchant bankers’ responsibilities to investors.
The Bangladesh Securities and Exchange Commission (BSEC) has moved to update the regulatory framework governing merchant bankers and portfolio managers after nearly three decades, aiming to strengthen licensing requirements, eligibility criteria, financial capacity, risk management and fiduciary duties towards investors.
The commission has formed a four-member committee to review and amend the Securities and Exchange Commission (Merchant Banker and Portfolio Manager) Rules, 1996. The BSEC's Law Department's CMRRC Department recently issued an order in this regard.
BSEC Director Md Mahmudul Haque has been appointed chairman of the committee. Its other members are Additional Director Mohammad Golam Kibria, Assistant Director Amit Kumar Saha and Assistant Director Md Mehran Ali, who will serve as member secretary.
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The committee has been tasked with reviewing the existing rules and submitting a report containing necessary amendment proposals within 30 working days.
The move comes as the regulatory framework for merchant bankers and portfolio managers, introduced in 1996, has remained largely unchanged despite significant changes in the country's capital market and financial sector over the past three decades.
The framework may also strengthen requirements for managing investors' money and assets, protecting client interests, maintaining confidentiality, managing conflicts of interest and ensuring accountability for failure to discharge responsibilities.
Merchant bankers currently undertake issue management, underwriting and portfolio management. Their role is also expanding into corporate bonds, sukuk, SME listings and other financial products. The revised rules may define the activities that different types of merchant bankers can undertake based on their capacity and risk profile.
BSEC Executive Director and spokesperson Md Abul Kalam told TBS that the 1996 rules are outdated and need to be updated in line with current market conditions. The commission is also reviewing licensing conditions, activities and eligibility criteria for merchant bankers based on national and international practices.
Particular attention will be given to the activities of full-fledged merchant bankers and their fiduciary duties towards investors, he said.
The existing rules were introduced in 1996 based on the capital market structure at the time. Since then, the market has expanded significantly, while financial products, investment patterns and technology-driven services have undergone substantial changes.
Although the rules have been amended at different times, the version available on the Bangladesh Securities and Exchange Commission (BSEC) website was last updated on 24 August 2021.
The revised framework is expected to clarify licensing requirements and the scope of merchant banking activities, strengthen accountability in managing investors' funds and create greater opportunities for capable institutions to introduce new financial products.
