Draft act proposes search committee for appointing BSEC chair, commissioners

The government has proposed the formation of a search committee to appoint the chairman and commissioners of the stock market regulator, as part of a major reform outlined in the draft of the Bangladesh Securities and Exchange Commission Act, 2025.

The Financial Institutions Division under the Ministry of Finance published the draft on 10 July to seek public opinion.

The proposed legislation consolidates the Securities and Exchange Ordinance, 1969, and the Bangladesh Securities and Exchange Commission Act, 1993, aiming to modernise and streamline regulatory oversight, according to the draft.

Speaking to The Business Standard, Abul Kalam, spokesperson for the BSEC, said the draft was prepared by the commission in collaboration with the finance ministry as part of a broader reform agenda for the capital market.

He said it includes a provision for forming a search committee for appointing the regulator's chairman and commissioners, aiming to ensure transparency, efficiency, and accountability in the process.

A member of the capital market reform task force, speaking on condition of anonymity, said the task force had initially proposed the creation of both a search committee and an independent oversight body to ensure regulatory accountability and to prevent unnecessary interference from the finance ministry. 

"While the finance ministry retained the provision for a search committee in the draft, it ignored the proposal for an oversight body," the member said, adding, "The task force believes such a body is essential to balance the power between the ministry and the commission."

According to the draft, a four-member search committee will be formed to select candidates for the roles of BSEC chairman and four commissioners. The committee will be headed by a judge from the Appellate Division of the Supreme Court, nominated by the Chief Justice. 

Other members will include the comptroller and auditor general, the chairman of the Bangladesh Public Service Commission, and the secretary of the relevant division from the finance ministry, who will serve as the member secretary of the committee.

When appointing commissioners, the BSEC chairman will also serve as a member of the search committee. 

The search committee will recommend two candidates from among the interested applicants for the positions of chairman and each commissioner, based on which the government will make the final appointments.

A managing director of a renowned brokerage firm said, "Over the past decade, appointments to a critical institution like the BSEC were made purely on political considerations, often involving unqualified and incompetent individuals. 

"As a result, the capital market's contribution to GDP has dropped to a minimal level. Investor confidence has eroded so badly that the stock market has failed to emerge as an alternative source of financing."

He believes that if qualified individuals are appointed through a proper vetting process by the search committee, it may be possible to bring back investor confidence.

Meanwhile, the draft proposal also increases the penalties for share manipulators.

Under the current law, violators face up to five years' imprisonment and a maximum fine of Tk5 lakh. The new draft doubles the maximum fine to Tk10 lakh and raises the prison term to 10 years.

It also addresses delays in handling market-related cases by allowing them to be filed directly in the Special Tribunal for the capital market. As per the current law, such cases have to go through regular courts, often causing prolonged delays and unnecessary hassles in case resolution.

The BSEC spokesperson explained, "Since a Sessions Judge presides over the tribunal, the provision for direct filing has been introduced to ensure quicker resolution of capital market-related cases."

The draft also includes a provision to protect investor funds held with brokerage firms from bankruptcy proceedings.

Explaining the rationale, Abul Kalam, the BSEC spokesperson, said, "Investor funds are typically held by brokerage firms, which are deposited in various banks. If a brokerage firm goes bankrupt, the funds in those bank accounts risk being frozen or seized. This poses a serious threat to general investors. To address this, the draft ensures that investor funds will not fall under the purview of a brokerage firm's bankruptcy."

He further added that the draft places greater emphasis on accountability among brokerage firms, listed companies, and auditors, while strengthening corporate governance requirements.

"Investor protection has been given the highest priority in preparing this draft," he said.