Probe 15 years' activities of capital market: Brokers

The DSE Brokers Association (DBA), a platform representing brokerage firms of the Dhaka Stock Exchange, has called for the formation of an inquiry committee to review the overall activities of the capital market from 2010 to 2024.

Additionally, the association has demanded equal representation in the appointment of directors on the board and a re-evaluation of the demutualization scheme under the Dhaka Stock Exchange Demutualization Act 2013.

The DBA submitted a letter to the finance adviser today outlining these demands.

The demutualization of the stock exchange was implemented in 2013, based on the recommendations of the Ibrahim Khaled committee following a major stock market crash in 2010.

This process separated the ownership of the stock exchange from its management. Since then, the 13-member board of directors of the country's premier bourse has included a majority of independent directors to ensure transparency and accountability.

Under the demutualization act, seven independent directors are appointed to the DSE board, one of whom is elected as chairman. Additionally, DSE's 250 shareholders directly elect four shareholder directors to join the board.

The DBA has emphasised that independent directors are appointed by the BSEC based on recommendations from the stock exchange's Nomination and Remuneration Committee.

In a letter to Finance Adviser Salehuddin Ahmed, the association stated, "The majority of seven independent directors, including the chairman, results in their sole dominance and influence over any decision related to the capital market, including the DSE."

"The DSE has become a dysfunctional institution since 2013 due to the numerical disparity between independent directors and shareholder directors, leading to inequality in the activities and decisions of the bourse."

To address these concerns and strengthen the stock exchange's role in the development of the country's capital market, the DBA has made several recommendations to the finance adviser.

In the letter, it called for a re-evaluation of the existing Dhaka Stock Exchange Demutualization Act 2013 and the Dhaka Stock Exchange Demutualization Scheme.

The association proposed that the board should consist of six independent directors and six shareholder directors to ensure equal representation.

Additionally, the chairman should be appointed from among the shareholder directors, as opposed to the current practice where the chairman is selected from the independent directors, it added.

The DBA also emphasised the need to restore investor confidence in the capital market by forming an inquiry committee to investigate the significant activities of the capital market over the past 15 years.

It is worth noting that M Khairul Hossain and Shibli Rubayat-Ul Islam, both professors at Dhaka University, have previously served as chairmen of the BSEC.

Khairul, a finance professor, had been the longest-serving head of the regulator.

Banking and insurance professor Shibli was appointed as BSEC chairman in 2020 for a four-year term. He was reappointed for a second four-year term after the first term expired. However, he resigned on 10 August, just five days after the fall of the Sheikh Hasina government.

Both commissions under his leadership faced allegations of various irregularities in the capital market, but no strict measures were taken to address them. 

The approval of initial public offerings for weak companies allowed these firms to raise crores of taka from the capital market. 

This not only failed to contribute to the overall development of the capital market but also eroded investor confidence due to share manipulation and irregularities.

On 12 August, the DSE Brokers Association held a press conference where they highlighted past irregularities and presented 30 demands. These included strengthening the regulatory body, restructuring the boards of capital market-related institutions, enhancing the stock exchange, and revising public issue regulations to attract strong companies to the capital market.

It is also noteworthy that individual directors have resigned from the board of directors of the stock exchange following verbal instructions from the commission. Consequently, the commission has begun the process of forming a new board. Initially, the commission intended to appoint directors on its own, but now, new directors will be appointed after reviewing the names proposed by the stock exchange.