HC keeps Tk30 lakh as minimum portfolio size for investing in SME stocks

SME board at a glance

• BSEC formed SME rules in November 2018
• DSE introduced the SME board in September 2019
• The platform debut in September 2021
• Now 16 companies are enlisted
• Around Tk150cr was raised in this platform
• Tk30 lakh investment limit for eligibility

The High Court has kept Tk30 lakh as the minimum investment limit for an investor to be qualified for trading in the SME platform stocks of the bourses.

Now, an investor, who has been maintaining a portfolio of minimum Tk30 lakh in listed securities on any platform, can trade in the SME board.

Earlier, in September last year, the Bangladesh Securities and Exchange Commission (BSEC) increased the minimum investment limit from Tk20 lakh to Tk30 lakh for an investor to be qualified for trading shares of companies on the SME board of the exchanges.

The High Court bench of Justice Farah Mahbub and Justice Muhammad Mahbub Ul Islam discharged the order on Wednesday.

The court also cleared that there will be no floor price for the SME market like the main board.

The BSEC gave three months to the investors who had already traded shares on the SME board with a portfolio of Tk20 lakh to increase their investment to Tk30 lakh.

Earlier, the limit was Tk50 lakh for eligibility but the commission decreased this limit to Tk20 lakh as the investors were not interested to invest in SME platform by complying with the condition.

Advocate Mostofa Kamal filed a writ petition in the court on behalf of investor Md Raju Hossen challenging the BSEC order.

Kamal told The Business Standard, "We filed a writ and that's why BSEC increased the minimum investment limit for SME investors."

"Then why does the BSEC not impose floor prices in the SME market like the mainboard?" questioned Kamal, adding that the court has already discharged an order regarding this on Wednesday.

BSEC lawyer Barrister AM Masum said the court has maintained the regulatory order of Tk30 lakh investment limit and also discharged the writ petition filed by Md Raju Hossen.

The court also discharged floor price issues in the SME platform like in the main market, he added.

BSEC Executive Director Mohammad Rezaul Karim said as a global practice, the commission fixed a limit in the SME platform, as the companies of the market are so volatile.

To protect the general investors, the court has maintained the BSEC order, which is positive for the capital market, he added.  

In November 2022, the High Court suspended the condition of investing Tk30 lakh in SMEs for two months. The BSEC then appealed to the High Court against that order.

The stock exchanges introduced their SME platform in September 2019 to attract businesses with small capital bases to the stock market and help them raise capital.

But in September 2021, the SME board of the Dhaka Stock Exchange (DSE) made its debut by trading shares of six companies. At present, 15 companies are listed on the SME market.  

The share price of the SME companies is so volatile as they are mostly low paid-up. As a result, this market is riskier than the main board of the bourses.

In FY22, investors saw impressive cash dividends from SME companies. Most companies recommended 10% cash dividends for their shareholders.

In November 2018, the BSEC gave final approval to the Qualified Investor Offer by Small Capital Companies Rules-2018 with some amendments.