The Bangladesh Securities and Exchange Commission (BSEC) has initiated the process to cancel the registration certificates of six merchant banks in the country due to their long-term failure to meet the minimum net capital requirements and a severe lack of financial capacity.
The regulator has also decided to launch investigations and seek explanations from several other merchant banks to probe the underlying reasons behind their net capital deficits.
According to decisions from multiple BSEC commission meetings and related sources, this action has been taken based on recommendations from a special investigative report.
The commission noted that these institutions have long failed to meet the minimum financial capacity requirements, violated various rules and regulations, and in many cases, their operations have remained entirely ineffective.
BSEC executive director and spokesperson Abul Kalam stated: "The financial capacity requirements set by the regulatory body are mandatory for every merchant bank. Actions are being taken under existing laws and rules against institutions that have repeatedly failed to maintain their required net capital. Additionally, an investigation has been ordered to find the root cause of the net capital deficit in two institutions. If any irregularities or violations of rules are found during the investigation, legal action will be taken against those responsible."
According to the commission's decision, the process to cancel registration certificates has begun for FAS Capital Management Limited, Imperial Capital Limited, NDB Capital Limited, Riverstone Capital Limited, HAL Capital Limited, and Roots Investment Limited.
The commission has directed its Market Intelligence and Investigation Department to conduct separate inquiries into UniCap Investments Limited and GSP Investment Limited to uncover the reasons behind their net capital deficits.
Meanwhile, an official explanation has been sought from Brac EPL Investments Limited regarding its net capital shortfall.
The company's explanation and its progress in increasing net capital must be presented at the next commission meeting.
According to the Securities and Exchange Commission (Merchant Banker and Portfolio Manager) Rules, 1996, the net capital of a merchant bank must be at least 50% of its paid-up capital.
When net capital drops below this prescribed threshold, it raises serious questions about the financial viability of the institution.
In such scenarios, the commission holds the authority to demand explanations, review operations, or take necessary regulatory actions, including the cancellation of registration.
Market insiders state that this BSEC crackdown on institutions failing to meet minimum net capital requirements sends a strong message toward ensuring financial discipline, accountability, and good governance among capital market intermediaries.
Furthermore, the ongoing investigations will bring transparency to the actual financial health of the concerned institutions.
Currently, there are 66 BSEC-registered merchant banks operating in the country.
Prior to this development, the commission had also initiated the cancellation process for CAPM Advisory over allegations of providing fake and misleading information in its prospectus.
