The price of Doreen Power Generations and Systems Limited shares was manipulated through serial and insider trading, according to a Bangladesh Securities and Exchange Commission (BSEC) investigation.
Doreen shares shot to Tk141.40 from Tk70.60 between October 16 and November 7, 2016, prompting the regulator to launch an investigation to see whether there had been any manipulation.
The probe body submitted their findings to BSEC recently. The Dhaka Tribune has obtained a copy of the report.
Share price manipulation
Five big investors and two institutional investors were found to have violated securities laws and manipulated prices through serial trading.
Although the manipulators earned big bucks through serial trading, small investors incurred huge losses. With insider information, the manipulators bought shares at lower prices and sold them at higher prices.
These manipulators are Bishwajit Das and his associates, Yakub Ali Khandaker and associates, Md Fazlur Rahman Jamali, Anis Uddin, Md Safiqul Islam, Ifad Group (Ifad Autos Limited and Ifad Multiproducts Limited), and Prime Islami Securities Ltd.
A misleading appearance of active trading in Doreen shares, violating the Securities and Exchange Ordinance, 1969, depressed the share price and induced their sale by others.
However, the traders claimed that their investments followed rules and regulations, while someone confessed to an inadvertent mistake and pledged not to violate any laws in the future.
Bishwajit Das told the BSEC: “I have been investing in the capital markets as an investor maintaining regulatory rules and regulations. I apologize for the inadvertent mistake of my trade activities and will be more careful in future. I assure that I will be very careful to comply with rules and regulations set by the regulator.
Yakub Ali Khandaker and associates gave a similar response to the probe committee.
Anis Uddin said, “Before investing in a share, I always try to analyze what would be the company’s growth. I thought the future production capacity of Doreen Power will increase and dividends as well. Then, I decided to invest in the share.”
“I have no bad intentions trading in Doreen Power. During my trading, if I made any mistake, I am sorry for the mistake and I will be more careful in future execution of trades” he added.
Chief Executive Officer (CEO) of Prime Islami Securities, Md Abul Kalam Eajdani told the Dhaka Tribune, “The BSEC has called us to a hearing. We have answered. Not only we, the affiliate of the company called the BSEC. We all responded with appropriate papers, expressing hope that the commission will take the right decision in this regard.”
“We have always been respectful of securities laws. To the extent of our knowledge, in the existing securities laws, there is no restriction on the investment of any brokerage house.” he added.
The investigation committee also found the involvement of five persons in insider trading. As per the securities laws, these persons are not allowed to buy company shares within a certain period. But they did it.
Investigators found that Mahtab Bin Ahmed, an independent director of Doreen Power, Chief Financial Officer (CFO) Afroz Alam, Deputy General Manager of Dhaka Northern Power, a subsidiary of Doreen Power, Wahiduzzaman Khan, Director (Development) of Doreen Power Mostafa Moin’s wife, Chowdhury Farah Naz Samia, and Company Secretary, Masudur Rahman Bhuiya, bought shares.
CFO Afroz told the BSEC: “I have [a] small investment in the share market of our country. The BO account – 120158000063969 was opened more than 20 years ago. As an investor, we need to invest in shares of those companies which have a future prospect and good management.”
Doreen Power Company Secretary Bhuiya told the Dhaka Tribune that he had bought 1,460 shares of the company “in excitement, without noticing that the purchase was made during a prohibited period.”
He said he had “immediately sold” all his shares after realizing his “mistake.”
‘Take tough action’
Former BSEC chairman AB Mirza Azizul said the regulator should not favour anyone. “The regulator should take stern action as per the law since the investigation committee has found price manipulation in the stock market,” he told the Dhaka Tribune.
The investors should be cautious while investing in such a company to avoid speculation based trading, he added.
BSEC spokesperson Saifur Rahman said the investigation committee has already placed the report before the commission. “The BSEC will take action based on the findings and recommendations made by the committee,” he told the Dhaka Tribune.
Stock market analyst, Professor Abu Ahmed, said manipulation was taking place due to lengthy investigations and dillydallying in punishing offenders.
He suggested taking swift action after any unusual price hike or manipulation to prevent the practice.