500,000 investors leave capital market in a year
BSEC wrong policy responsible
Mahfuz Emran: More than five lakh Beneficiary Owners (BO) accounts have been closed in the capital market of the country in a year. Share market related and analysts believe that such a large amount of BO accounts have been closed due to the wrong policy-planning of the regulatory body -Bangladesh Securities and Exchange Commission (BSEC).
They say, recently there have been some decisions taken by the regulatory body which have not been friendly for investors. Among these are setting minimum investment in the secondary market for IPO applications and banning cash transactions between customers and brokerage houses. As a result of such decision of BSEC, a part of investors left the capital market. As a result of which more than five lakh BO accounts were closed within a year.
They also say that closing more than five lakh BO accounts within a year is not a good sign. This will create obstacles in the development of the capital market. The more investors participate in the market, the more the market expands. Similarly, if investor participation decreases, the market will shrink. On the one hand, the speed of transactions will slow down, on the other hand, there will be instability in the market. Hence regulatory agencies should adopt policy plans that increase investor participation in the market.
BSEC sources told that the top management of the organisation is involved with unethical practice including the deal of buying and selling of shares of different junk companies. It is also learnt that the top management of BSEC has siphoned more than Tk 3000 crore from the capital market in Singapore.
A review of the data shows that the number of both domestic and foreign investors has decreased within a year. Among these investors, there are male investors as well as female investors. However, the number of institutional investors has increased. In total, from the beginning of July 2021 to July 14 of this year, BO accounts have decreased by 5 lakh 21 thousand 780.
Once upon a time there was no obligation to invest in the secondary market in case of IPO application in the stock market. However, at the beginning of 2021, BSEC imposed the obligation of investing at least Tk 20 thousand in the case of IPO applications. And in June of this year, it has been further increased and the obligation to have an investment of at least Tk 50 thousand has been imposed. As a result of this, the number of BO accounts may decrease further, according to the stock market.
Besides, previously investors could make cash transactions up to Tk 5 lakh in the brokerage houses.
In August 2020, the DSE Brokers Association of Bangladesh (DBA) demanded to increase the amount of cash transactions to Tk 10 lakh in a letter to the Chairman of BSEC. Although DBA demanded to increase cash transactions, the capital market regulatory body has completely stopped cash transactions this year.
As a result, investors can’t do any cash transactions in brokerage houses. Stock market stakeholders believe that this has had a negative impact on investors.
According to the data of Central Depository of Bangladesh (CDBL), on the last working day of June 2021 or June 29, BO accounts were 25 lakh 36 thousand 431, which has reduced now (July 14, 2022) to 20 lakh 14 thousand 651.
Among these BO accounts, there are currently 14 lakh 98 thousand 309 BO accounts of male investors. At the end of June 2021, this number was 18 lakh 69 thousand 449. That is, the BO account of male investors has decreased by 3 lakh 71 thousand 140.
Currently there are 5 lakh 194 BO accounts of women investors. At the end of June 2021, this number was 6 lakh 52 thousand 275. According to this, the BO accounts of women investors have decreased by 1 lakh 52 thousand 81.
Among individual investors, currently there are 19 lakh 25 thousand 404 BO accounts in the name of domestic investors. Which at the end of June 2021 was 23 lakh 80 thousand 874. That is, the BO account of domestic investors has decreased by 4 lakh 55 thousand 470.
On the other hand, currently there are 73 thousand 99 BO accounts in the name of foreign investors. At the end of June 2021, foreign investors’ BO accounts were 1 lakh 40 thousand 850. That is, the BO account of foreign investors decreased by 67 thousand 751.
Although the number of domestic and foreign individual investors has decreased by a large amount, company BO accounts have increased during this time. Currently there are 16 thousand 148 company BO accounts. At the end of June 2021, this number was 14 thousand 707. That is, company BO accounts have increased by 1 thousand 441.
A member of DSE said that earlier cash transactions were available up to Tk 5 lakh. As a result, investors used to take cash from the house only in case of urgent need. Now cash transactions have been stopped. As a result, if an investor needs money on Thursday, the last working day of the week, he can’t collect money on that day. Because the account pay check is given to him from the brokerage house.
As a result, it became Monday to get the cash. A section of small investors find it problematic. As a result, a part of them is leaving the stock market. Many people are also closing BO accounts due to the minimum investment requirement.
Share market analyst Professor Abu Ahmed told that due to the wrong policy and planning of BSEC, the BO account is decreasing in the capital market. The decisions taken by BSEC have not been investor friendly. Which is hindering the development of the market.
When contacted, Director of Dhaka Stock Exchange Shakil Rizvi told Daily Industry that minimum investment obligation has been imposed in the secondary market by removing the lottery system in the case of IPO. As a result, some BO accounts have been closed. Again, the cash transaction of the brokerage house with the customer has been stopped. This too was not taken well by some investors.
He said that since the beginning of the stock market, some cash transactions between brokerage houses and customers were in operation. In case of urgent need of money, the customer used to receive cash from the house. But due to BSEC directive no brokerage house is doing cash transactions with customers now. Account pay checks are now issued from brokerage houses instead of cash.
DBA President Richard De Rosario said that there are several reasons for the closure of the BO account. Now to apply for IPO you have to invest at least Tk 50 thousand. Many will not apply for IPO by investing this money. Due to which they closed the IPO accounts.
He said, now that cash transactions have been stopped, it has had a negative impact. Because most of our small investors here used to take Tk 10,000 to Tk 20,000 cash from the brokerage house either for house expenses or for other expenses. When they see that cash can’t be taken like this, they withdraw money. In this way the BO account has been closed a lot.
He also said that before taking such a decision, one should have thought about the consequences. If we can’t increase the number of investors, how many times will the same people trade. So, the number of investors should be increased. On the contrary, if the number decreases, it is not a good thing. It will hinder market development.
President of Bangladesh Merchant Bankers Association (BMBA) Chhaydur Rahman told, I think the number of BO accounts has decreased due to fixing the minimum investment limit in the secondary market in case of IPO applications. Now allotment of shares in IPO is on pro-rata basis. In this, the cost of maintaining the BO account is not raised with the shares that are available through the IPO application. As a result, those who opened BO accounts just to apply for IPO are closing them.
BSEC Executive Director and Spokesperson Mohammad Rezaul Karim said that some BO accounts have been closed due to non-payment of annual renewal fees. And now shares are being allotted in IPO on a pro-rata basis and an investment obligation of Tk 50,000 has been imposed in the secondary market. As a result, those who used to apply more in IPO with different BOs, now they will need a lot of money to do IPO, due to which some BO accounts may decrease. However, the Commission has no research of its own in this regard.
Previously, the brokerage house could do cash transactions up to Tk 5 lakh with the customer, now it has been stopped. As a result, some BO accounts have been closed, claiming from various brokerage houses. In response to a question about how the BSEC is looking at the matter, he said, “I don’t know what is the connection between the cash transactions and the closure of the BO account.” Cash transactions have been stopped to ensure safety of investors’ money.
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