Millions of taka stolen from capital market through manipulation

Staff Correspondent: After the Awami League government assumed responsibility in 2009, there was a big jump in the country’s capital market in one and a half years. After this unusual jump, there was a sudden collapse in January 2011. Investors commit suicide due to losses. After that, the government took the initiative to form an inquiry committee and to reform and reorganize the capital market regulatory body Bangladesh Securities and Exchange Commission (BSEC).
In this continuation, Dhaka University Finance Professor Dr. M Khairul Hossainwas in charge of the chairman of the organization for 10 years.. Shibli Rubaiyat-ul-Islam, professor of banking and insurance department of the same university, took over as his successor in 2020. However, due to various controversial activities and nepotism of these two chairmen, the concerned people think that the capital market of the country has gone to the edge of the abyss.

Over Tk 1 lakh crore have been stolen from the country’s capital market through forgery, manipulation, placement shares and fraud in the last 15 years, according to market participants. Among them, many companies raised money from the capital market through Initial Public Offering (IPO) but could not improve their business and financial condition. On the contrary, there have been incidents of IPO money spent against them in different sectors. Besides, after coming to the IPO, entrepreneurs have taken money from the capital market by artificially increasing the price of the company’s shares. A large sum of money has also been siphoned off in the placement process. In many cases placement shares have been given to influential people as gifts without money. They sold these shares at a higher price after listing the company. Tk 25 thousand crore have been stolen from the capital market through these activities related to IPO.
Beximco Group is accused of misappropriating around Tk 20,000 crore through mergers of various companies, sukuk and bond issues and placement shares. In addition, in the last 15 years, many beneficial stock traders and company entrepreneurs have stolen large sums of money from the market through capital market manipulation. In terms of money, the amount can be as much as Tk 55 thousand crores, market concerns think.
After the 2011 capital market collapse, the report of the inquiry committee headed by Ibrahim Khaled highlighted the issue of placement trade, irregularities in the IPO process, suspicious transactions under the cover of omnibus accounts, the role of influential traders, brokers and market players. The report provides a list of companies whose share prices jumped at abnormal rates in 2009 and 2010. It can be seen that in 2009, the share price of Beach Hatchery increased by 829 percent, the share price of Purbi General Insurance by 567 percent, the share price of Aftar Automobiles by 478 percent, the share price of Padma Cement by 466 percent, and the share price of Rahim Textile by 342 percent. Similarly, in the following year in 2010, the share price of City Vegetables increased by 4,158 percent, Safco Spinning by 792, Tallu Spinning by 444, Rahima Food by 320 and BD Welding by 299 percent.
In Ibrahim Khaled’s investigation report, there were several warnings and recommendations to the government noting the fact that the investigation report of the 1996 capital market crash was not taken into consideration. In this case, it is said, ‘In the investigation report of 1996, Imtiaz Hossain, Khorshed Alam, Salman F Rahman, Enayetur Rahim, Rakibur Rahman, Shakeel Rizvi and others were in the list of suspects. In the current investigation, the role of Salman F Rahman and Rakibur Rahman among them has been widely discussed and some information has also been provided. Both are believed to have been active in influencing the SEC. Many believe that Salman F Rahman and Rakibur Rahman strongly lobbied and supported the appointment of SEC chairman and re-appointment of member Mansoor Alam. Salman F Rahman himself staged aundue demand to the Governor of Bangladesh Bank in protest of the opaque case of BD Thai Aluminum. Salman F Rahman is involved in cases like GMG, Unique Hotel etc. cases are opaque. Both had unintended influence in the running of the SEC. Because of this, the image of the government has been damaged among the general public.
The warnings and recommendations of the investigation report were not heeded by the government or the regulatory body. Because even after 2011, the influence of these two continued in the country’s capital market.
After the collapse, on May 15, 2011, as part of the capital market reform program, The government appointed ProfessorM Khairul Hossain as the chairman of BSEC. Professor Helal Uddin Nizami of Chittagong University’s accounting department, former official of Central Bank, was appointed with him as commissioner. Amjad Hossain, top executive of the corporate sector Arif Khan and former district judge Abdus Salam Sikder.
Dr. Khairulserved as the chairman of BSEC for the longest time. The government even appointed him for the third term by breaking the law. He was responsible for the reform of the country’s capital market. During his tenure, many laws and regulations were formulated in the capital market, but in many cases, there was a deficiency in their implementation. Especially during the term of Khairul Commission, there are allegations of bringing weak and substandard companies to the capital market in the listing in the capital market through IPO. During this time a large manipulation circle was formed consisting of influential entrepreneurs, issue managers, auditors and a class of investors. In many cases, the officials of the regulatory agencies themselves played the role of accomplices by giving loopholes or concessions in the law.
In the last 15 years, 149 companies have raised more than Tk 11,000 crore from the capital market through IPOs, most of which came during the tenure of the Khairul Commission. Many of these companies are currently financially weak and broke. Several companies have stopped production. Even adverse reports from stock exchanges were not taken into account in case of IPO. Khairul Commission did not pay attention to complaints of irregularities regarding the registration of Coppertech Industries. Even late Finance Minister Abul Mal Abdul Muhit advised Apollo Ispat not to be listed but the then Chairman of BSEC Khairul Hossain did not heed. The Khairul Commission approved the IPO of Ring Shine Textile, a company that was discussed in the case of placement scam.
Former Managing Director of Dhaka Stock Exchange (DSE) KAM Majedur Rahman told, “The first capital in the capital market is trust.” If there is transparency, good governance and fair play there will be trust. Why would people come if they have to calculate the loss the day after investing? Capital markets should be allowed to run on their own. Although not a regulatory body, they often seek to exercise guardianship over stock exchanges. Here the share price of the bad company is increased and decreased at will and there is no regulation. DSE also has nothing to do in many cases, as control rests with BSEC. If a small amount of money is fined after one year of manipulation then it is not enough. Tk 3000 crore were taken through sukuk by breaking the law. The board of DSE and BSEC must take responsibility for the failure of the capital market to be dynamic. In transition from the existing situation, the regulatory body and stock exchange should be brought with strong management.
At the time of Khairul Commission, the mutual fund sector, an important part of the country’s capital market, has been handed over to the beneficiaries. In particular, the top two companies in the term mutual fund sector, Rais Management PCL and LR Global Bangladesh Asset Management Company, have been accused of misappropriating the money of unit holders, but no action has been taken by the BSEC. The BSEC has shown favoritism to Rais leaders Chowdhury Nafiz Sarafat and Hasan Taher Imam and Riaz Islam, CEO of LR Global. In particular, the Khairul Commission has extended the tenure of all term mutual funds for another 10 years. However, the mutual fund managed by AIMS Asset Management went into liquidation before the end of the term. The market participants believe that this period was extended mainly to facilitate the flights. As a result of this change, the confidence of investors in this sector has gone down.
The appointment of BSEC chairman for the third term. M Khairul Hossain made it more controversial. During this period, angry investors used to march against him. Never before have investors come out on the streets against a BSEC chairman. The most criticized floor price system in the country’s stock market was also introduced during the Khairul Commission. As a result, the reputation of the capital market in the international arena is tarnished. Moreover, the placement business of Matiur Rahman, a former official of the National Board of Revenue (NBR), emerged during the Khairul Commission. Capitalizing on the financial weakness and tax evasion of the IPO companies, Motiur grabbed the placement shares. Moreover, former IG of Police Benazir Ahmed, ACC and officials of various organizations were the beneficiaries of the placement trade.
BSEC’s former chairman Farooq Ahmed Siddiqui told, “The capital market was very bad in the last 15 years. There was no good governance, good companies were not listed, share prices were manipulated, the trading of good companies was stopped by giving floor price. So far manipulation is going on through bad shares. Although there are many laws, they are not enforced in many cases. Because of this, people’s confidence in the capital market is gone. The regulatory body has committed many types of irregularities, many have been given privileges, proper measures have not been taken against manipulation. Currently, almost all indicators of the country’s economy are in a bad state. The events of the last one-and-a-half months have hit him harder. How long it will last is a question. One should not expect that the economy and capital markets will improve overnight. This will take some time. Only time will tell how much of the bullishness seen in the capital market in the last three days is due to logical reasons and how much due to emotions.
Commissioner Arif Khan resigned citing personal reasons before the end of the first term of the Khairul Commission. Although the people concerned think that he resigned to save himself from the disgrace of the Khairul Commission. However, market participants feel that he cannot avoid responsibility in the case of Khairul Commission’s weak and controversial IPO approval. Because Arif Khan was the Commissioner of the Capital Issue Department, which is under the jurisdiction of the IPO approval department of BSEC. Two more commissioners served during Khairul’s tenure. One of them was the late professor Dr. Swapan Kumar Bala and Khandkar Kamaluzzaman.
The country’s economy and capital market were disrupted by the impact of covid just before the departure of the Khairul Commission. In addition to imposition of floor price to prevent share price fall, transactions are closed for 66 days. In this situation, on May 17, 2020, Professor Shibli Rubaiyat-ul-Islam took charge as the chairman of BSEC. Professor of finance department of Dhaka University took responsibility as commissioner with him. Sheikh Shamsuddin Ahmed, Professor of Accounting and Information Systems Department Mizanur Rahman and former secretary Abdul Halim. Later, Professor Rumana Islam of the Law Department of Dhaka University joined as a member of the Shibli Commission.
At the beginning of the Shibli Commission, several initiatives were taken, including the introduction of transactions in the capital market, which attracted the attention of the market stakeholders. Some big fraudsters in particular are fined big sums. Many thought that the capital market would turn around after the painful experience of the Khairul Commission. But after a few days the investors were disappointed.
There are allegations of indirect and direct favoritism by the Shibli Commission to several market manipulators in the rise of indices to boost the capital market in the post-Covid era. For the past few years, the capital market has been discussed by the deputy registrar in the Directorate of Investor Cooperatives Abul Khair Hiru and his associates have earned thousands of crores of taka through manipulation.
Apart from himself, Hero also made cricketer Shakib Al Hasan a partner in his manipulation. Hero and Shakib’s firm Monarch Holdings has been granted brokerage license by BSEC. Another controversial investor Jabed A Mateen was involved with this institution. He is accused of fraud. A report by the Organized Crime and Corruption Reporting Project (OCCRP) even revealed that Shibli Rubaiyat received money from a bank account linked to a million-dollar fraud. The name of Javed Mateen was found with this money transaction and he is mentioned in the report as a friend of Shibli Rubaiyat.
Apart from Matin-Hiru, a class of big investors in the capital market have made huge sums of money by investing in different companies at different times due to the indulgence of the Shibli Commission. In 2021, the year after Shibli took charge, the five companies that saw their shares rise the most were Sonali Paper 321 percent, Fortune Suze 317, Emerald Oil 284, Salvo Chemical 253 and Genex Infosys 231 percent. The top gainers in 2022 were Orion Infusions 507 percent, Imam Button Industries 400, Sea Pearl Beach Resorts & Spa 317, Meghna Condensed Milk Industries 183 and Jute Spinners 174 percent. Among the stocks that gained the most in 2023 were Khan Brothers PP Oven Industries 686 percent, Legacy Footwear 338, Khulna Painting & Packaging 223, RN Spinning Mills 161 and Fine Foods 134 percent.
The share price of Bangladesh Monospool Paper Manufacturing increased by 146 percent, Taufika Foods by 128 percent, and Paper Processing and Packaging by 118 percent between January and June this year. Most of these are weak and sick companies. However, no visible action has been taken by the BSEC in many cases regarding the abnormal increase in the share prices of the companies. It is alleged that some people involved in the manipulation have been spared despite being investigated on a case-by-case basis.
Mia Mamun was the mastermind behind the rise of Emerald Oil’s share price by talking about Japanese investment. However, no Japanese investment has come into the company so far. However, at various times this company has been indirectly assisted by BSEC to manipulate. Apart from this, some entrepreneurs have made large sums of money by bringing their loss-making companies from the over-the-counter (OTC) market to the main market, using the opportunity of friendship with the Shibli Commission.
During the time of Shibli Commission, the prevalence of share price manipulation in the capital market of the country increased a lot. Shibli Rubaiyat himself has played a role in influencing the share price and capital market by saying that the indices and transactions in the capital market will increase in the next day or that foreign investment is coming in the shares of a sector. Gambling shares were so attractive at the time that investors were also seen gravitating towards shares of weaker companies rather than fundamental and large-cap companies. Moreover, even if there was a committee to investigate the case of share manipulation, many times this information was kept secret from the media or was not officially disclosed. However, as per the long-standing practice of BSEC, this information was always officially communicated to the media. Even if sensitive information was available, the decision of the commission meeting was not made public. Moreover, although he did not directly obstruct journalists’ access to BSEC, he did so on certain floors.
Moreover, at the time of the Shibli Commission, the asset management company UFS Asset Management and Alliance Capital have also been accused of misappropriating the money of the unit holders. Although BSEC has not been able to bring back these funds till now. Although the incident of placement fraud of Ringshine Textile was uncovered, no disciplinary action was taken in this regard. Besides, there are accusations of appointing Shibli Rubaiyat’s close colleagues including teachers through restructuring the boards of sick and weak companies. Despite the reorganization of the board, the financial and business conditions of most of these companies have not improved.
Professor Shibli Rubaiyat-ul-Islam has not visited the office since the fall of the Awami League government. He resigned from the post of BSEC chairman last Saturday by sending an e-mail. As a result, no response was received even when contacted to know his statement on this matter.