Market participants demand share purchase against bank cheques

The capital market participants have demanded the securities regulator to backtrack on its recent decision that deters them from purchasing shares against bank cheques before encashment.  

The DSE Brokers Association of Bangladesh (DBA) and Bangladesh Capital Market Investors Association came up with the call in separate letters to the Bangladesh Securities and Exchange Commission (BSEC).

The regulator recently asked stockbrokers not to purchase shares against bank cheques before encashment.

Previously, clients were allowed to give bank cheques to stockbrokers, and the brokers would instantly purchase shares from their own account without knowing whether the clients had that money in their bank accounts or not.

Market participants said the recent order will have a negative impact on the market by accelerating the downturn of the indices.

The investors drew parallels of the recent development with a similar circular on 6 December 2010 when the notorious market crash took place, and they desperately sold off stocks.

In December 2010, though the BSEC revoked its circular just after two days, it did not help the market avert the crash, they further said.

Creating purchasing power against a cheque from a client is a good faith practice in the brokerage industry, that the cheque will be honoured in one or two days, despite the fact that letting anyone buy securities without money in their accounts was and still is prohibited in securities law.

To ensure there are no loopholes in brokerage firm accounts, the BSEC went strict to stop the practice that was also creating some false purchasing power every day, mostly in favour of some brokerage clients who were in connivance with the broker concerned.

Some abusers repeatedly issue cheques to their broker, and buy trendy stocks and their cheques are never honoured.