BSEC takes action against Sinha Securities over misuse of clients' funds

The Bangladesh Securities and Exchange Commission (BSEC) has taken strict measures against Sinha Securities Ltd, a brokerage firm, due to its failure to adjust the shortfall in clients' funds in the consolidated customers' account (CCA).

In a meeting on 18 September, the commission decided to freeze all bank and beneficiary owner (BO) accounts of the company's directors, including the managing director and chief executive officer (CEO), according to BSEC sources.

The commission requested the Bangladesh Financial Intelligence Unit (BFIU) to freeze bank accounts.

It also decided to impose a travel ban on the directors, managing director, and CEO of the firm.

According to the Dhaka Stock Exchange (DSE), on 14 August, the deficit in the firm's consolidated customers' account (CCA) stood at Tk8.49 crore. Previously, the deficit was Tk 8.51 crore on 7 March, which was supposed to be settled by 19 March.

A CCA is a separate bank account maintained by stockbrokers to hold unused cash from their clients' beneficiary owner's (BO) accounts.

It is strictly prohibited to utilise this money for any purpose other than paying for securities purchased by the client or collecting commissions or fees owed by the client.

Any use of funds from the CCA for purposes other than these specified payments would result in a deficit in the CCA.

As the extension period for adjusting the deficit was nearing its end in March this year, Sinha Securities requested another one-year extension from the BSEC and asked for a renewal of its depository participant (DP) licences.

However, declining its plea for further time extension, the commission decided to take action against the firm.

Despite several attempts, Reza Ur Rahman Sinha, CEO of Sinha Securities, did not respond to phone calls made by TBS.

Md Tawhedur Rahman, manager (finance & accounts) of the firm, told TBS, "We did not get any official letter from the BSEC."

According to DSE officials, during a spot inspection last year, a team from the bourse discovered a deficit in Sinha Securities' CCA. 

Consequently, the BSEC suspended the brokerage firm's trading activities from 14 May to 27 June 2023. Following a partial adjustment to the deficit, the trade suspension on Sinha Securities was lifted.

Later, imposing some conditions, the BSEC directed the firm to adjust the deficit within December 2023. However, it missed the deadline, then again, the commission extended the time till 19 March this year.

Sinha again missed the extended deadline and requested the BSEC to extend it for 12 more months.

In the letter sent to the BSEC, the firm's Director Reza-Ur-Rahman said that the suspension of trading activities caused many of their customers to cease doing business with them, resulting in significant losses for the company.

"The unhealthy competition within the industry has significantly reduced profits, impacting our other ventures, including trading and agro-business. The introduction of the floor price by BSEC in 2022 to control the fall in share prices has also limited our trading capacity," he said.

"As a result, we have been unable to fulfil our payment commitments on time. In the event of any further delays, we commit to making payments by selling the sponsor shares of another concern, ACME Pesticide Ltd, which will mature in November 2024," he added.