Regulator to go tough on institutional investors | The Daily Star
12:00 AM, October 11, 2018 / LAST MODIFIED: 12:17 AM, October 11, 2018

Regulator to go tough on institutional investors

The stockmarket regulator said it is going to change the definition of institutional investors so that they played their due role in the market instead of staying aloof.

Prof Md Khairul Hossain, chairman of the Bangladesh Securities and Exchange Commission (BSEC), said if stock dealers, merchant banks and asset managers don't play their roles, their names will be removed from the list of institutional investors to bar them from enjoying quota benefits in initial public offering (IPO).

According to Public Issue Rules-2015, institutional investors get 60 percent shares of a company if it enters the market through the book building method and 50 percent shares in case of fixed-price method.

Stock dealers, merchant banks and asset management companies are considered as institutional investors irrespective of whether they carry out their responsibilities or not.

In the new definition, they will be considered institutional investors if they abide by rules, said Hossain, also a professor of the finance department of the University of Dhaka.

He said some stock dealers do not operate dealer accounts, while some stock brokers use the money of consolidated account illegally.

Besides, some merchant banks fail to bring any IPO to the market in two consecutive years, while some asset managers have taken the licence but can not bring any fund to the market, said the professor.

“All of them will be struck off from the list of the institutional investors so that they can't get any benefit as an institutional investor. Besides, their registration will be reviewed.”

His comments came at a conference organised by Dhaka Stock Exchange (DSE) at the Institution of Diploma Engineers, Bangladesh on Tuesday.

Hossain asked Bangladesh Bank to be strict so that a loan repayment culture in the banking system develops.

“Liquidity problem in the capital market will never be solved if embezzlement culture continues in the banking system.”

Prof Md Helal Uddin Nizami, a commissioner of the BSEC, said Bangladesh Bank and the insurance regulator were not helping the stockmarket regulator with policy support.

He said the central bank has not taken any decision yet despite instructions from the finance ministry. Recently, the ministry has sent a letter to the BB asking it to take some initiatives, including changing the definition of capital market exposure of banks.

The commissioner said the BSEC has no power to track the mobile phone conversations of gamblers, which prevents it from stopping the spread of rumours on stocks.

He said some people were trying to create panic among investors ahead of the national election, saying the market would fall further. “These types of rumours affect the market.”

“Investors should not pay heed to such rumours and should invest in a company for a long time.”

Swapan Kumar Bala and Khondoker Kamaluzzaman, commissioners of the BSEC, Prof Abul Hashem, DSE chairman, and KAM Majedur Rahman, DSE managing director, also spoke.

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