Protect investors’ funds to shore up their confidence

Stockbrokers in the county should ensure proper monitoring of their own activities as the continued misuse of investor funds could lead to poor confidence in the market, according to top officials of the Bangladesh Securities and Exchange Commission (BSEC).

The commission is working to raise investor confidence by presenting the stock market as a vibrant place for investment, said Prof Shibli Rubayat-Ul- Islam, chairman of the BSEC.

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But if stockbrokers fail to ensure the safety of investor funds, they will not be able to remain confident in the market, he added.

Islam's comments came during an awareness programme, styled "Strengthening Security of Fund and Securities of Investors", organised by the Dhaka Stock Exchange (DSE) on Tuesday at the head office of the premier bourse.

"The brokers should be more cautious with investor funds than they are with their own money," the BSEC chairman said.

He went on to say that as the BSEC's main purpose is to monitor the market situation, its efforts to penalise wayward stockbrokers are not often shared with the media even though five intermediaries have already been penalised for breaching rules.

"We don't want to create any hassle in the brokers' office, so it would be better if they ensure their own monitoring and the Dhaka bourse will also work hard to this end," Islam said while speaking as chief guest.

"If any stockbroker misuses investor funds, then it effects the whole market and all of our endeavours become meaningless," he added.

With this backdrop, the BSEC chairman ordered all stockbrokers to follow the rules and regulations in place. He then assured that the commission would always help resolve any problem that rises in the stock market.

The market needs to register higher turnover for stockbrokers to see increased business, but this is only possible when investor confidence is stable.

Islam also asked the DSE to bring in blockchain technology as the use of modern equipment could help reduce the number of irregularities.

"People in Bangladesh have massive funds and since our savings tools are not generating adequate returns, the stock market has huge potential to attract these funds," said Md Abdul Halim, a commissioner of the BSEC.

"So, if they have enough confidence then the market will be flooded with huge investment," he added.

Besides, it is much better for ensuring the safety of investor funds when stockbrokers properly maintain regulatory compliance.

"You [stockbrokers] know the pain of getting caught by regulators when breaching rules, so you should strengthen your own internal control," Halim said.

The BSEC wants to make life easier for compliant intermediaries, but all of them are now under pressure due to the actions of a few bad people, he added.

Three stockbrokers embezzled investor funds worth about Tk 256 crore in the last one-and-a-half years.

Of the total amount, Tamha Securities embezzled Tk 142 crore, Banco Securities siphoned off Tk 66 crore and Crest Securities defrauded investors of Tk 48 crore.

"This is a matter of concern for us as these types of activities are the main reasons behind low confidence in the stock market," said Md Eunusur Rahman, chairman of the DSE.

The culprits behind the embezzlement are travelling around with their own cars but the victims are in a tight corner and even struggle to run their livelihoods due to poor regulatory framework.

Shuvra Kanti Choudhury, managing director of Central Depository Bangladesh Ltd (CDBL), said that if brokers can strictly avoid executing any trade without the investors' order, then the problem will reduce.

"They should strengthen their internal control system so that no one can break the securities rules and misuse investor funds," he said.

Richard D Rozario, president of DSE Brokers Association of Bangladesh, said stockbrokers should enhance monitoring on their own to reduce all the errors because it can hit their own goodwill.

Although market turnover rose to the Tk 2,000-crore level for a few days, it is now back down to the Tk 600-crore level again. "So our business became tougher," he said.

Tarique Amin Bhuiyan, managing director of the DSE, also spoke.