Brokerage firms must update CCA status daily: BSEC

Infographic: TBS

The Bangladesh Securities and Exchange Commission (BSEC) has instructed stock exchanges to develop a uniform online platform where stock brokers can update their Consolidated Customers' Accounts (CCA) status daily at the end of trading hours. 

The directive was issued to both the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE) today.

A Consolidated Customers' Account (CCA) is a separate bank account maintained by stockbrokers to hold unused funds from their clients' beneficiary owner (BO) accounts. 

These funds are strictly to be used only for paying for securities purchased by the client or collecting commissions or fees owed by the client. Any unauthorized use of the funds from the CCA results in a deficit.

To enhance transparency and accountability, both exchanges will create this unified platform for CCA updates. Brokerage firms will be required to update their CCA status daily through the platform. 

The stock exchanges will monitor the CCA status regularly, and if discrepancies are found, they will take appropriate action.

As part of this initiative, the stock exchanges will also scrutinize the CCA calculation method and develop a standardized format for CCA calculations. These documents must be submitted to the BSEC, and the standardised format will be published on the official websites of both exchanges.

The commission has also instructed stock exchanges to review the existing documentation process for the renewal of stock dealer and stock broker registration certificates. The stock exchanges will submit a specific proposal to the commission to streamline the renewal process of brokerage firms.

The BSEC has asked for a status report on the progress of implementing these instructions, along with supporting documents, to be submitted within 15 days.

Top officials from both stock exchanges, speaking anonymously with TBS, expressed concerns about the challenges of providing an accurate CCA status in a short time frame. 

They explained that bank transactions are involved in CCA status updates, and some bank cheques may not be cleared on time, making it difficult for brokerage firms to provide accurate CCA figures. 

The stock exchanges plan to discuss these issues with the commission on Tuesday, along with ways to streamline the renewal process for brokerage firms.

Currently, stock brokers and stock dealers apply to the stock exchange for a renewal certificate. After obtaining consent from the stock exchange, they seek approval from the BSEC. 

Once regulatory consent is granted, the stock exchange issues the renewal certificate. However, this process is considered time-consuming and more difficult than necessary.

What actions BSEC take in case of a deficit in CCA

If the BSEC identifies any deficit in a brokerage firm's CCA, the regulator can suspend all quota facilities for that firm. 

During such suspensions, the brokerage firm loses several privileges, including access to free limit facilities provided by the stock exchanges, eligibility for Initial Public Offering (IPO) quotas as a qualified investor, and dividend rights as a stock exchange member.

Additionally, the firm is prohibited from opening digital booths or branches until compliance is restored. If the brokerage firm fails to clear outstanding dues, its renewal of the depository participant license will also be suspended.

Earlier, five other brokerage firms embezzled approximately Tk460 crore of investors' money, according to reports from the stock exchanges.

Recently, Moshihor Securities Ltd was found to have misappropriated clients' funds invested in the capital market for years by evading regulatory oversight through the use of multiple servers and databases. 

According to a letter from the DSE to the securities regulator, Moshihor Securities embezzled a total of Tk161 crore, including Tk68.58 crore of investors' money and Tk92.35 crore of investors' shares. As a result, the BSEC suspended all facilities for the firm due to the deficit.

Similarly, Tamha Securities misappropriated Tk139.67 crore by illegally using additional software and providing false information to clients about their investment status. Of this, Tk92.57 crore was in cash, and Tk47 crore in securities.

In June 2021, the DSE suspended the trading of Banco Securities after it was found to have embezzled Tk60 crore. The DSE discovered a deficit of Tk128 crore in Banco's CCA, including Tk66.11 crore in cash and Tk61.97 crore in securities.

Crest Securities abruptly closed its operations and shut down its office without prior notice. The DSE found a deficit of Tk65.30 crore in the company's CCA, including Tk44.90 crore in cash and Tk20.40 crore in securities.

Shah Mohammad Sagir & Company was also suspended for failing to settle trades after embezzling Tk13.74 crore.