DSE's month-long dysfunctional board impedes key decisions

Infographic: TBS

The Dhaka Stock Exchange (DSE) has now spent a month with a dysfunctional board, resulting from an unprecedented intervention by the Bangladesh Securities and Exchange Commission (BSEC). 

While day-to-day operations continue as usual, major policy decisions—typically made by the board—remain stalled, according to top DSE officials. 

They noted that no board meetings have taken place since the fall of the Sheikh Hasina-led government on 5 August, with the last meeting held on 1 August. Normally, at least one board meeting is held each month.

A top DSE official, speaking on condition of anonymity, told The Business Standard that the absence of a functional board is delaying important policy decisions that require board approval. 

"It is very unfortunate that the DSE's board has remained dysfunctional for over a month, even after the political changes. This is not a good sign," said Saiful Islam, president of the DSE Brokers Association (DBA), a platform for Trading Right Entitlement Certificate (Trec) holders of the premier bourse.

Following the political shift, the capital market regulator verbally ordered all independent directors of the DSE and Chittagong Stock Exchange (CSE) to resign. The next day all independent DSE directors stepped down, while DSE Chairman Hafiz Md Hasan Babu, a dean at the University of Dhaka, had resigned on 19 August.

The BSEC then appointed seven independent directors to the DSE on 1 September. However, none have assumed their roles yet. 

Meanwhile, concerns were raised about the appointments of two independent directors, KAM Majedur Rahman and Helal Uddin, as their selection reportedly violated board and administrative regulations. Both individuals have since declined to join the DSE.

Another senior DSE official mentioned that they are currently addressing minor issues with input from the four shareholder directors who remain on the board. 

"In the absence of a full board, we are also relying on discussions and guidance from the Management Committee (MANCOM)," the official said. 

"Daily operations are running smoothly, but policy-related matters face challenges. Normally, the board meets at least once a month, but no meetings have been held since August," he added.

To ensure neutrality, strengthen corporate governance, and enhance business efficiency, independent directors are appointed to the boards of stock exchanges. 

Each board consists of 13 members: seven independent directors, five shareholder directors (including one representing strategic investors), and the managing director as an ex-officio member. 

According to the 2013 Board and Administration Regulations, independent directors must hold the majority in all board committees, including the chairmanship, ensuring they play a decisive role in committee decisions and functions. 

The regulations also require that a quorum for board meetings includes one-third of the directors, with the majority being independent directors. 

Since the resignation of all independent directors, the boards have remained defunct.

DBA President Saiful said the prolonged absence of the DSE board is undoubtedly affecting its ability to make policy decisions. "It is unacceptable for the DSE's board to remain non-functional for over a month." 

"The stock exchange is the primary regulator for nearly 400 listed companies. If it is not properly regulated, how can it effectively oversee these companies?" he asked.

While there may not be an immediate impact on general investors, the inability to address key policy matters will have long-term consequences, he warned. "The DSE board must become operational without further delay."

BSEC commissioner resigns 

In another development, ATM Tariquzzaman, a commissioner of the BSEC, resigned today, citing personal reasons. 

However, market insiders said his resignation comes amid tussle with stakeholders on appointment of independent directors of the DSE.

A notification from the Financial Institutions Division said Tariquzzaman's resignation will be effective on 17 September. 

Previously, the Division had planned to remove him with a three-month notice period, effective from 10 December. 

On Sunday, the BSEC reshuffled the duties of its commissioners, but Tariquzzaman was left without any assigned tasks despite having approximately three months remaining in his tenure.