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Shareholder can’t be brokerage CEO
Owners of brokerage houses will not be allowed to serve as chief executive officers (CEOs) according to the draft of a regulation of the Bangladesh Securities and Exchange Commission (BSEC).
The regulation titled “Bangladesh Securities and Exchange Commission (Stock Dealer, Stock Broker and Authorised Representative) regulations, 2023” was published on the BSEC website seeking stakeholders’ comments within November 9.
It included a provision on appointing a CEO who could not be a director, sponsor or shareholder of the brokerage house, meaning that segregation was sought between the company’s management and its owners.
Existing brokerage houses which are in violation of this provision will get six months from the publication of the regulations as a gazette to appoint a CEO.
At present, most CEOs of brokerage houses are either their directors or shareholders.
Another provision says the brokers will have to appoint compliance officers to submit compliance reports to the regulator every month.
The new regulations said the brokerage houses would have to include a representative from the investors in its board.
A top official of a brokerage house, preferring anonymity, said it was very tough for many brokerage houses to appoint a CEO as most of them were struggling to run business amidst sluggish trade in the stock market.
But another provision to keep a higher paid-up capital will fare better for the market. However, many brokers will struggle to maintain it, he added.
According to the draft regulations, to get a stock brokerage licence, applicants need to keep at least Tk 5 crore as paid-up capital, joint ventures with foreign entrepreneurs at least Tk 8 crore and fully foreign ownerships Tk 10 crore.
In case of stock dealer licensing, the paid-up capital for local entrepreneurs is at least Tk 10 crore.
To get a stock broker and stock dealer licence, the minimum paid-up capital required is Tk 15 crore and for joint ventures or fully foreign ownerships it should be Tk 20 crore.
According to the new regulations, stock exchanges are going to investigate every brokerage house and their branch offices at least once every two years to reduce misuse of investors’ funds.
A top official of the BSEC said the regulator included the provision to avoid misuse of peoples’ funds, which was witnessed in some brokerage houses over the last couple of years.
Misuse and embezzlement of funds in some brokerage houses dented the confidence of investors as a whole in the industry so the regulator is being strict regarding the issue. Investigations can give early signs and reduce such incidents, he added.
The regulator can run special audits any time while stock exchanges also can conduct audits any time by taking approval from the BSEC.
But the stock exchanges will have to run a routine investigation in every brokerage house at least once every two years and send an investigation report to the regulator, the draft regulations said.
#The Daily Star