The Dhaka Stock Exchange (DSE) found some Tk18.25 crore deficit in consolidated customer accounts of six stock brokerage firms.
Among them, M Securities Limited had the highest of Tk10 crore in deficit followed by Island Securities Limited, which had a Tk6.43 crore deficit and Bali Securities with a Tk1.22 crore deficit in their respective consolidated customer accounts (CCA) as of February 10.
Meanwhile, DMR Securities Services, Hedayetullah Securities and Sharp Securities had deficits of Tk20.68 lakh, Tk10.3 lakh and Tk3.26 lakh respectively in their CCAs.
It was informed that an inspection team from the bourse recently visited the brokerage firms and identified that the consolidated accounts containing client funds were in a deficit, according to a letter sent by the DSE to the Bangladesh Securities and Exchange Commission (BSEC).
"These securities houses are not maintaining a sufficient fund of customers in the consolidated customers’ accounts," said a member of the inspection team.
The accused brokerage houses declined to comment on this.
On April 12, BSEC asked DSE to conduct inspections in the six brokerage houses as per rule 6(5) of securities and exchange rules, 2020.
The regulator gave the instruction to the DSE as the bourse informed the BSEC earlier on April 7 that it had not conducted any inspection in the six brokerage firms, which was a non-compliance with the provision.
As per the provision 6(5), the stock exchange must conduct an inspection immediately for any shortage or deficit found in the consolidated customer accounts of any stockbroker, with intimation to the commission, as well as submit the report of inspection to the commission within seven days of the completion of such inspection.
Every stockbroker will open only one consolidated customer account in its name with any scheduled bank with intimation to the exchange, and the aforesaid account will be maintained only for the deposit of the money, received from and for the customers and the payment of money to and for the customers, according to the rules.
Besides, no stockbroker will, in any way, keep the balance of consolidated customer accounts as a lien or underlying for any purpose or lend it to any person or entity.
This happened before as well. The BSEC faced huge criticisms after some brokerage houses embezzled huge amounts of investors’ funds from the CCAs, market operators said.
On February 9 this year, DSE also found a deficit of Tk7 crore in CCA of Modern Securities Ltd after conducting a spot inspection in the brokerage house.
On March 22, the BSEC imposed five restrictions that the stock exchange must suspend free limit facility, IPO quota facility as eligible investor, dividends against ownership of stock exchanges, registration of TREC holder company and depository participant, and opening new branch and booth, on brokerage houses having shortfall in CCA and shares.
The regulator came up with the decision as it observed that a number of brokerage houses fell short in their consolidated customer accounts and were reluctant to pay back the deficits in the account despite repeated warnings, BSEC officials said.
At that time, there were around 25 brokerage firms in the DSE which had deficits in their consolidated customer accounts.
The stockbrokers secretly used a parallel software database to report fabricated cash and securities balances, buy and sales order execution updates to the clients as well as the regulators, BSEC officials said.
On December 9, 2021, the DSE suspended the trading operations of Tamha Securities on allegations of embezzling Tk85 crore of investors’ money through data engineering.
In June 2020, the owners of Crest Securities Limited went into hiding after allegedly embezzling Tk48 crore of clients’ money.
On June 14, 2021, the DSE suspended operations of Banco Securities for alleged embezzlement of Tk66 crore from the consolidated customer accounts.
A brokerage company's main duty is to act as a middleman that connects buyers and sellers to facilitate a transaction.