BSEC pushes unified back-office system to curb investor fund embezzlement
BSEC pushes real-time broker monitoring to curb misuse of investors' funds.
The Bangladesh Securities and Exchange Commission (BSEC) is pushing for a unified, secure back-office software system for brokerage houses to prevent the misuse of investors' funds and detect financial irregularities in real time.
The system would give regulators real-time access to brokers' bank balances and funds held in customer clearing accounts (CCAs), enabling daily reconciliation and early detection of any shortfall, BSEC Chairman Masud Khan said today (28 September).
"We need a unified back-office software that will be highly protected and provide real-time data from brokers so that we can conduct complete reconciliation every day," he said at a programme in Dhaka.
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He was speaking at the inauguration of the distribution of Investor Protection Fund (IPF) money to investors affected by financial irregularities at brokerage houses. The event was organised by the Dhaka Stock Exchange (DSE) at DSE Tower.
Masud said financial irregularities involving five securities houses had affected 17,967 investors, with Tk492 crore involved in the cases.
Calling the scale of the problem concerning, he said the BSEC, DSE and investor representatives had begun a coordinated effort to address the losses.
The IPF was originally established to address settlement risks in the capital market. But it has assumed broader importance in Bangladesh following cases in which brokerage houses failed to safeguard investors' money, Masud said.
He stressed that preventing such incidents would require stronger technology-based surveillance rather than reliance on manual regulatory oversight.
Under the proposed digital framework, regulators would be able to regularly verify the funds held by brokerage houses in their bank accounts and CCAs. Such real-time monitoring could reduce the need for extensive direct intervention, he said.
Masud also called for further development of order management systems (OMS), saying the capital market needs stronger digital infrastructure to keep pace with a technology-driven financial system.
17,332 investors to get initial compensation
DSE Chairman Mominul Islam said five brokerage houses had taken investors' money or securities into their own accounts through various means and subsequently failed to return them.
"Investing in the capital market involves both gains and losses. Share prices rising and falling is a normal and internationally recognised feature of markets. But when investors suffer because of irregularities by a market intermediary, it seriously damages their confidence in the capital market," he said.
According to Mominul, the DSE has identified 17,967 affected investors. Of them, 17,332 will receive full payment of up to Tk5 lakh each from the IPF in the initial phase.
Masud said around 96% of affected investors have claims below Tk5 lakh, meaning the initial reimbursement will cover the vast majority of those affected.
Investors with claims above Tk5 lakh will be compensated in phases, he said, adding that authorities expect to eventually cover all affected investors through the IPF and other legal mechanisms.
Mominul said the DSE and other market stakeholders would continue efforts to recover the remaining amounts for investors whose claims are not fully covered initially.
He acknowledged the financial and emotional hardship caused by the brokerage failures and said restoring investor confidence would require coordinated efforts by the BSEC, the two stock exchanges, Central Depository Bangladesh Ltd (CDBL) and brokerage houses.
Determining the identities of the 17,967 affected investors, calculating their investments and establishing their final balances had been a challenging process, but the DSE management had completed the task, he said.
The IPF is partly financed by contributions from the brokerage community. A major source of the fund is brokers' trading commissions and 25% of the interest earned on CCA accounts, according to Mominul.
He said the DSE's compensation initiative would not have been possible without contributions from brokerage houses.
