BSEC to make listing mandatory for 'public interest companies'

The Bangladesh Securities and Exchange Commission (BSEC) is planning to frame a regulation to bring certain “public interest companies” to the stock market under The Securities Act, said its Chairman Masud Khan today.

He made the remarks as chief guest at an open discussion on the capital market's current state, organised by the DSE Brokers Association of Bangladesh (DBA) at DSE's multipurpose hall in Dhaka. 

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Under the Securities Act, the stocks regulator has the authority to direct any company to list in the public interest, Masud said.

He disclosed that the commission now plans to define what qualifies as a “public interest company” and frame rules under the existing provision. "Those companies falling under certain categories will have to apply."

The move is meant to bring eligible companies to the market rather than relying solely on voluntary listing decisions, according to the BSEC chief.

He said the commission expects direct listing, a revamped initial public offering (IPO) process, and a hybrid listing mechanism together to encourage more good companies to get listed.

The direct listing regulation will be made public for feedback within days, while the IPO rule will be made public within a few months, he said. 

Noting that the IPO process currently takes too long, Masud said, with companies required to submit documents to both the Dhaka Stock Exchange (DSE) and the BSEC. 

He explained that as both agencies make the assessments, it leads to a prolonged listing process, sometimes taking a year to a year-and-a-half. “This is how the patient dies.”

To address this, the BSEC is proposing an extended audit under the new IPO rules, the BSEC chief informed. The audit would go beyond a conventional statutory audit, verifying whether a company's assets, land titles, receivables, and liabilities actually exist.

Under the proposed system, auditors would certify financial statements as "true and fair," after which the DSE would not raise further questions on those statements. The exchange would instead assess whether the company's business model is viable.

"From now on, issuing companies will submit IPO applications to DSE or Chittagong Stock Exchange and give us a copy," Masud said. "We at BSEC will not ask any questions. All questions will go to DSE or CSE."

He said several large companies are already showing interest in listing through direct listing.

He also said the hybrid mechanism is expected to be introduced within a week. Under it, a company would be able to offload some shares through direct listing and some through IPO.

Beyond listing reforms, the BSEC and DSE have taken steps to develop the bond market, including cutting trading fees, he added.

Also speaking at the event, Md Mominul Islam, chairman of the DSE, said the stock exchange already decided to reduce bond listing fees by and other fees by around 80 percent to revamp the corporate bond market.

He also said the bourse is working on returning client funds stuck at several brokerage houses.

Thousands of investors falling victim to embezzlement at several brokerage firms over the past five years, The Daily Star has reported previously.

Nearly a dozen brokerage houses have reportedly embezzled hundreds of crores of taka over the last few years.

Four brokerage houses -- Moshihor Securities, Banco Securities, Crest Securities and Tamha Securities -- collectively embezzled around Tk 270 crore since 2020, as per BSEC.

Earlier in May this year, the regulator fined four firms – NBL Securities, Gibson Securities, UCB Stock Brokerage, and Khulna Printing & Packaging – and several of their officials Tk 1.09 crore for securities law violations and fraud in the stock market.  

Later in June, a BSEC probe found that brokerage firm Salta Capital had embezzled around Tk 100 crore in client funds and shares.

Several brokers at the event called for bringing good companies to market, an easier listing process, and greater transparency and accountability.

They also said the exchange should not issue notices over large buy orders from a single brokerage house, and should instead examine whether brokerage houses are running repeated trades to influence the index.