DSE Investor Protection Fund misusing: BSEC

Zarif Mahmud: A gross lacking of transparence has been accused in the investor protection fund of Dhaka Stock Exchange (DSE), which is much talked about in the stock market. In this regard, DSE is providing information to the regulatory body Bangladesh Securities and Exchange Commission (BSEC) from time to time. According to DSE’s latest letter to BSEC, the fund size would be Tk 52 crore as per estimates from two sources. However, the commission thinks that if calculated properly, this amount will exceed Tk 100 crore. Also, the information given about the interest income of long-standing funds is also not acceptable. Again, DSE seeks permission to use the funds illegally in the Information Technology (IT) sector. As a result, the commission has formed an investigation committee to look into the details. The committee has been asked to report within 60 days. The commission is of the opinion that compensation to the affected investors of the three brokerage houses-Banco, Tamha and Crest Securities, who stole the money of the investors through this fund, is possible to some extent. Later, if the money is received by selling the assets of the houses, it will be adjusted in that fund. BSEC sources confirmed the matter.
When asked, BSEC executive director Mohammad Rezaul Karim said Daily Industry that BSEC is always active in protecting the interests of investors. The commission is doing various things for this. And as a part of this, this inquiry committee has been constituted as per the rules of the Investor Protection Fund. He said, the sources from which the money is supposed to come in this fund, whether it is coming or not, will be investigated. BSEC also had a directive in this regard. That directive is not being followed.
The committee will look into how this fund can be used for the overall benefit of the investors. However, in this regard, acting managing director of DSE Saifur Rahman Majumder told Daily Industry that there is a separate trustee for managing the fund. DSE representatives are there. But there are more outsiders than DSE. Hence there is no ambiguity here.
If asked, Chairman of the Board of Trustees of the Investor Protection Fund, Justice Md. Abdus Samad told, “How much money is in the fund, you have to see the documents.” Regarding the interest income, he said, “Basically, the money of the fund is deposited in the bank. But how high the interest income is, the bigger question is security. Money is kept where it is safe. He also said that a company promised to pay a higher rate of profit, but the principal might not be received at a later date. Therefore, instead of investing in risky companies, one should invest in safe companies even if the profits are low.
It is known that ‘Investor Protection Fund’ is formed to protect investors in case of major losses in the stock market. Both stock exchanges have this fund. Basically, money comes in three ways. First, the brokerage house contributes some money to this fund every year. Secondly, some money is also paid from the stock exchange. Thirdly, as per the demutualization (separation of ownership and management) scheme of the exchange, there is a legal obligation to deposit all the dividends and accruals of the positions whose owners are not found, into this fund. But DSE is not taking these into consideration. Sources say that the stock exchange is not giving any specific information to BSEC about this fund. Each time gives different information in this regard. It was recently informed by DSE that Tk 21 crore will be deposited in the fund till July 13, 2023. Also there is Tk 32 crore against five non-proprietary memberships. As a result, the size of the fund will be Tk 52 crore. There, the interest income in 20 years against Tk 21 crore has been shown as Tk 13 lakh. But the commission feels that this information is not correct. Because, the interest rate information is absolutely unreliable. According to them, if the correct calculation is done, the amount of money of the fund will exceed Tk 100 crore. BSEC held a meeting on the matter on June 26. In that meeting, it was decided to form a 5-member investigation committee to investigate where the funds are. The convener of the committee BSEC director Mansoor Rahman, Additional Director Abul Kalam Azad, Deputy Director Bani Amin Khan, Assistant Director Amit Kumar Saha and General Manager of CDBL Share Depository Company Rakibul Islam Chowdhury.
The letter states that in the larger interest of the capital market and common investors, DSE needs to explore the Investor Protection Fund. As per the Investor Protection Fund Regulation 2014, it is important to verify the amount of money deposited and annual interest from the sources from which the funds are provided. Also in October 2013, the demutualization scheme of the stock exchange was announced. At that time 4 non-proprietary memberships were covered under the scheme. As per rules, the accumulated money of these positions will come under the Investor Protection Fund if the owner does not get these memberships within 5 years. Accordingly, after October 2018, this money is supposed to come to the protection fund. But why it did not come, it is important to identify who is responsible for it. For these reasons, the committee was formed. The committee has to submit its report within 60 days. However, sources said, another membership was found beyond the demutualization scheme. As a result, 5 membership fees are supposed to come into the fund.
However, a different proposal was made by DSE. It is said in that proposal that there is some money against 5 memberships. In that case, the amount deposited till October 2018 will go to the Investor Protection Fund. Again, the accumulated money from 2019 will be used for the development of IT department of DSE. However, the commission did not take that proposal into consideration.
Meanwhile, 3 brokerage houses have collected money from investors through fraud during the Corona period. The combined shortfall of the last three brokerage houses is Tk 394 crore. Of this, Tamha Securities has a deficit of Tk 140 crore, Crest Tk 128 crore and Banko Securities Tk 126 crore. The commission is of the opinion that the small investors of the three brokerage houses can be helped to some extent with this amount from the Investor Protection Fund. In the future, the funds will be adjusted by selling the assets of the three houses.