Island Securities fined Tk20 lakh over GMG share anomalies

Brokerage house Island Securities Limited faced regulatory action over allegations of unauthorised withdrawal of funds from a client's BO (Beneficiary Owner) account and their use in purchasing placement shares of GMG Airlines.

Following an investigation, the Bangladesh Securities and Exchange Commission (BSEC) found the allegations to be substantiated and recently ordered the firm to refund the client's money or face a Tk20 lakh fine.

According to the BSEC enforcement department's investigation report, client Md Golam Rahman of Island Securities filed a complaint with the Dhaka Stock Exchange on 29 July 2025. 

He alleged that Tk12.2 lakh was withdrawn from his BO account on 15 April 2010 without his consent, adding that the funds had been deposited to purchase shares in the secondary market.

The complainant further said despite repeated oral and written complaints over the years, no resolution was provided. He submitted written complaints to Island Securities on 17 January, 29 February, and 10 April 2016, but the matter remained unresolved.

However, Island Securities denied the allegations, saying the funds were used to purchase GMG Airlines placement shares based on the client's verbal instructions. 

The company added that there was strong demand for GMG Airlines placement shares in 2010 and that, like many investors at the time, the complainant had also shown interest in acquiring them.

However, the investigation found that the brokerage could not produce any written authorisation, requisition slip, or supporting documentation for the withdrawal. 

During a tripartite meeting held at the Dhaka Stock Exchange on 17 August 2025, the firm reportedly admitted that no such written approval existed.

The BSEC report also said the brokerage failed to take timely action to resolve the client's complaints. It further highlighted a lack of transparency in handling client funds, a failure to maintain proper documentation, and the submission of inconsistent or unsupported information.

The investigation concluded that Island Securities violated several provisions of the Securities and Exchange Ordinance, 1969 (Section 18) as well as multiple rules under the stock-dealer, stock-broker and authorised representative regulations.

The violations include unauthorised transfer of client funds and failure to properly address investor complaints.

Based on these findings, the regulator on 12 May ordered the brokerage to refund Tk12.2 lakh to Md Golam Rahman within 30 days. If the firm fails to comply within the deadline, it will be required to pay a Tk20 lakh fine to the commission.

The penalty must be submitted via bank draft or pay order in favour of the BSEC, failing which further legal action will be taken.