BSEC dual role hampers stability in share market

Somewhere strict, somewhere flexible

Special Correspondent: Despite being involved in irregularities in the stock market, no punishment was given in any case. Some have received heavy punishments even though they were not directly involved in the irregularities. As a result, there have been complaints that the regulatory body Bangladesh Securities and Exchange Commission (BSEC) is showing flexibility in some cases and strictness in others.
According to sources related to the stock market, recently, despite being directly involved in the ownership, Sonar Bangla Capital Management has performed the responsibility of issue management to bring Union Insurance to the stock market. Similarly, shares of BD Thai Food are held by Southeast Bank, Southeast Bank Capital Services and Alamgir Kabir-controlled BLI Capital. However, the institutions have worked to manage the company’s issues. BSEC has not taken any disciplinary action in these cases.
On the other hand, Hamdul Islam, Managing Director of Banco Finance and Investment, has to face a financial penalty of Tk 10 crore and a 5-year ban despite not holding shares in Lovelo Ice Cream, Sea Pearl, BBS Cables Company. Besides, his relatives have been fined Tk 16 crore for buying placements in those companies despite not being involved in the ownership of Banco Finance.
BSEC claimed that Hamdul Islam’s relatives have violated 3(2)(d) of the Public Issue Rules of 2015 due to the holding of placement shares in the companies that are responsible for the issue management of Banco. Because of this, Hamdul Islam and his family have been fined. But there is no provision in the BSEC Act that no issue manager can trade shares with the relatives of the MD of the company.
3(2)(d) of the Public Issue Rules, 2015 states that the Issue Manager can’t be associated with the issuer and cannot hold shares. As amended on July 18, 2017, the issue manager and any person associated with it can’t be associated with the issuer and cannot hold shares.
Issue Manager is defined in Section 2(j) of the Securities and Exchange Commission (Merchant Bankers and Portfolio Managers) Rules 1996, Merchant Banker means a person registered to act as a corporate adviser, portfolio manager, observer and issue manager under these Rules Certificate received. And individuals finance companies, statutory bodies.
As per BSEC definition, the Issue Manager is Banco Finance. The officers and employees and owners of that institution are associated with it. But BSEC fined Hamdul Islam’s relatives for buying shares in Banco Finance’s issuer company. But Hamdul Islam did not buy shares from any of these.
However, recently BSEC has approved Union Insurance, which is directly associated with the issue manager Sonar Bangla Capital, to withdraw money from the stock market. No action was taken in that case.
According to Union Insurance’s draft prospectus, the company has invested in Sonar Bangla Insurance. Its subsidiary company is Sonar Bangla Capital Management. Sonar Bangla Capital Management also owns Union Insurance. With this in mind, Union Insurance has come to the stock market under the supervision of a proprietary issue manager.
Meanwhile, another company BD Thai Food and Beverage has a similar incident. BLI Capital Limited has done issue management to bring the company which started trading on January 24 this year to the stock market. Its holding company is Bay-Leasing and Investment.
In other words, BLI Capital is a subsidiary of Bay-Leasing. Certain directors hold common shares in Bay Leasing, BLI Capital and Southeast Bank. Who also hold shares of BD Thai Food. Through this, BD Thai Food came to the stock market.
BD Thai Food has as pre-IPO or placement shareholders – Humayan Kabir, Director of BLI Capital, Chairman of Southeast Bank. Alamgir Kabir, Southeast Bank and Southeast Bank Capital Services. Whose shares will be locked-in for 3 years.
Among these 4 individuals and institutions, 1 lakh shares of BD Thai Food are held by Humayun Kabir, 20 thousand shares by Alamgir Kabir, 6.2 lakh shares by Southeast Bank and 3.2 lakh shares by Southeast Bank Services. BLI Capital, led or associated with them, managed the issue of BD Thai Food.
Alamgir Kabir was the chairman of Southeast Bank but was a major shareholder of the financial institution Bay-Leasing and Investment. Who recently sold the shares of the company. His wife Suraiya Begum is one of the founder directors of Bay-Leasing, director Tariq SujatBhagane and director Zubair Kabir is his nephew. Independent Director Zaidi Sattar is the Director of Southeast Bank Foundation. As a shareholder, Bay Leasing’s EVP M Moniruz Zaman Khan is also a director of Southeast Bank.
Besides, Southeast Bank and the bank owned Southeast Bank Capital Services are the top shareholders of Bay-Leasing. From 2010 until last December, Southeast Bank and Southeast Bank Capital Services owned about 20 percent of Bay-Leasing. Currently, Southeast Bank owns 1 crore 40 lakh 12 thousand 405 shares, which is 9.95 percent of the total shares of the financial institution.
Southeast Bank Capital Services owned 1 crore 36 lakh 65 thousand 209 shares of Bay Leasing till last December. Which was 9.65 percent of the total share of the financial institution at that time. Now there are only 3 million shares. Last January, the merchant bank sold 41 lakh 55 thousand shares and in February 61 lakh 30 thousand shares worth about Tk 35 crore.
Apart from this, Southeast Bank Chairman Alamgir Kabir sold all of his nearly 4 million shares of Bay Leasing held as his personal BO. He sold all shares of Bay-Leasing held in his name between April and June last year. He held these shares for more than a century.
Although strict action has been taken against the managing director of Banco Finance and Investment Hamdul Islam and his relatives, questions have been raised as no action has been taken against BLI Capital and Sonar Bangla Capital Management.
When asked about this, Executive Director and Spokesperson of BSEC Mohammad Rezaul Karim told, “I do not know anything about this.” Can’t comment.
BD Welding shares sold out
Recently, BSEC has consented to handover sponsor’s shares of BD Welding to Sea Parl. Last week these two companies have singed an agreement.
BD Welding don’t have any factory at the moment even but the share price has increased to Tk 30 yesterday. The company chairman ShafiqulIslam with the connivance of BSEC has played the game to increase the share price during last one year.
Sources told Daily Industry that BD Welding owed huge amount of money to different suppliers, land owners and workers. The company has huge unpaid taxes as well, told a source of NBR.
NBR has attached the bank account of BD Welding in IFIC Bank due to the non-payment of huge taxes but the company chairman Shafiqul Islam has reactivated the bank account managing the officials of NBR officials. A handsome amount of fund of BD Welding have already withdrawn by Shafiqul Islam, told the bank sources.
The BSEC has advised Bangladesh Welding Electrodes Limited to sell 25.25 per cent shares held by Investment Corporation of Bangladesh (ICB).
ICB has a representation on the board of directors of the company against the shares which remained blocked as per the rules.
On August 24, the BSEC gave the advice after a meeting with the board of directors of BD Welding at the regulator’s headquarters. BSEC Chairman Shibli Rubayat-Ul-Islam presided over the meeting.
Before selling the stake to any potential buyers, BD Welding needs to take approval of the regulator, according to BSEC officials.
Sponsor directors hold 31.01 per cent, institutional investors 2.88 per cent, foreign 0.72 per cent, and general public 65.39 per cent of the company’s total stake, according to the Dhaka Stock Exchange.
Since 2017, the production of BD Welding remained suspended due to shifting of the factory from Chittagong to Dhaka.
The listed company sold its factory located in Chattogram to pay off Southeast Bank’s loan amounting to more than Tk 7 crore.
At the meeting, the BSEC also advised the company to take necessary steps to reinstate the company secretary since his removal process was not in line with the securities laws.
The regulator said that executive directors should not be engaged in any operational issues of the company since the tenure of the executive directors appointed by the company time to time expired.
The statutory audit of the company and pending annual general meetings (AGMs) should be completed subject to approval from the High Court, the meeting was told.
The board meeting should be conducted according to the norms of secretarial practice and securities laws. No one other than board members, the company secretary, and the chief financial officer of the company should be allowed to attend any board meeting, according to the meeting.
In January 2021, the BSEC restructured the board of BD Welding Electrodes by appointing two independent directors to the board of the non-performing company.
According to the BSEC, the commission will also appoint a special auditor to the company to conduct an audit on the company’s whole affairs, including those in the last two financial years at the company’s cost.
The company will not be allowed to sell, pledge, transfer, or dispose of any assets, including FDR, without prior approval of the commission.
In 2009, five out of eight sponsors sold their entire holdings to the ICB, and now the state-owned investment entity is represented on the BD Welding board.
The manufacturing entity, which was established in 1969, was the first welding electrode manufacturing facility in East Pakistan with a total plant and machinery from Switzerland.
The company was taken over by the government of Bangladesh in 1973 as abandoned property. The government divested it in 1984, and the factory was purchased by a former bureaucrat who was the highest bidder.
BD Welding manufactures and markets welding electrodes, industrial gases, and dissolved acetylene. The factory facilities consisted of two products, namely: welding electrodes and industrial gas.