Three investors fined Tk4.51cr for manipulating Midland Bank shares

The Bangladesh Securities and Exchange Commission (BSEC) has fined three investors a total of Tk4.51 crore for manipulating the share price of Midland Bank through aggressive and disproportionate trading over a six-month period.

According to a recent enforcement order, the fined individuals are Quest Asia Overseas, its proprietor Anichul Islam, and his spouse Nahar-E-Jannat. 

Quest Asia Overseas, an international recruiting agency, received the largest penalty of Tk3.70 crore, while Anichul and Nahar were fined Tk80 lakh and Tk1 lakh, respectively.

The BSEC investigation found that between 13 March 2024 and 23 September 2024, Quest Asia and its associates purchased 2.19 crore shares and sold 1.73 crore shares of Midland Bank across both the public and block markets. 

Their combined trades accounted for 17.99% of the bank's total shares during the review period.

This unusually large volume of buy-and-sell activity contributed to a sharp rise in Midland Bank's share price, which surged 123% to Tk27.60. In the process, the group realised a capital gain of approximately Tk4.99 crore, according to the regulator.

During a hearing at the commission office, Anichul Islam defended the trades, claiming they were motivated by a newspaper article that described Midland Bank as being in the industry's "green zone," indicating financial strength. 

He argued that the transactions were based on publicly available information and denied any intent to manipulate the market.

He further said they were not aware of any specific regulatory limit on daily trading volume in a single stock, noting that their periodic buying and selling was intended to secure profits and help "calm" the market.

However, the BSEC dismissed the explanation, stating that the investors had clearly violated rules restricting excessive transactions in a single security, and concluded that their trading pattern constituted deliberate market manipulation.

According to Clause 17 of the Securities and Exchange Ordinance, 1969, no person may directly or indirectly engage in activities aimed at influencing the sale or purchase of any security to their advantage. 

The law specifically prohibits executing a series of transactions that create a false impression of active trading or artificially raise or depress a share's price to induce others to buy or sell.

But, it does not specify the daily trading volume limit in a single stock.