Prof Shibli Rubayat-Ul-Islam, chairman of the Bangladesh Securities and Exchange Commission (BSEC), who was previously the dean of the Dhaka University's Faculty of Business Studies, discusses the country's stock market in an interview with Dhaka Tribune's Niaz Mahmud.
You have been in charge at the BSEC for more than two months now. What initiatives did you undertake during this period?
The recent steps taken by our new commission aimed to protect retail investors’ rights and regain their confidence.
In the last two months, we expedited enforcing actions against non-compliant entities, next-level automation of the market infrastructure for efficiency; as well as approving new debt securities.
Meanwhile, we are trying to increase financing through the capital market. We will establish the concept that the capital market is the main source of funds for industrialization.
Has there been initiatives regarding listed good companies in the capital market?
General investors suffer when bad companies with questionable financials enter the market. The commission will not allow anything that hurts investors.
We are working on approving the initial public offering (IPO) of a good and established company. We have already cancelled IPO proposals of some companies based on our observations and those of the stock exchanges themselves. Many inconsistencies were detected in the financial statements of companies whose IPO proposals were rejected.
Besides, the commission would advocate for restoring and enhancing incentives for the stock market listing of well-governed and performing companies.
We are taking some more initiatives to list big companies.
Can good governance of listed companies' directors be ensured?
We have asked 61 directors of 22 listed companies to ensure maintaining a minimum 2% share in their own companies to continue their directorship.
The securities regulator has no scope of allowing a director at a listed company if he/she does not hold minimum 2% shares.
Some directors are facing pressure to hold 2% shares within stipulated periods. That is why we are giving them some extra time on a case-to-case basis.
We have not yet imposed a penalty on any director not complying with that directive. But they have no other alternative but to do so. Good governance will not be ensured if all compliances are not fulfilled. Trust of investors depends on the shareholders’ compliances. We should ensure the safety of their hard-earned money invested in the capital market.
Does market infrastructure need development?
The new commission is giving top priority to the capital market's automation. This process is already underway. The commission hopes to complete the process within six months to a year.
The regulator would see whether a virtual annual general meeting (AGM) can be permitted with slight changes. Printing a huge number of annual reports can be reduced by ensuring the distribution of those online. The commission may also allow companies not to send documents to the BSEC every month.
Our stock market has remained only equity-based. I will focus on launching bond, debenture, Sukuk and alternative investment funds in the market.
There are allegations against BSEC that the regulatory body interfered in share transactions. What is your comment on this regard?
We do not interfere in the market, but work on the implementation of regulations in the stock market. Our stance is against manipulation to protect investors' rights.
What is your plan to prevent the domination of junk stocks?
A company can incur losses for a while. This is a normal issue. But some companies are fleeing by taking investors' money intentionally. We will take action against them. We are planning to work on the junk stocks in three stages. In the first phase, we will upgrade the companies that are very close to booking profits, or have large retained earnings or adequate cash flow.
There are two to five companies in this stage and a decision will be taken about them by checking their recent financial reports.
In the second phase, the regulator will support the companies that are struggling but are making an honest effort to return to profit.
And in the final stage, we will punish the worst performers by either changing their boards or by deploying administrators. Though the companies are counting losses, their stock prices are high. This is doubtful.
Do you have any message to local and foreign investors?
It is high time to invest in the country’s stock market in the long run. Stakeholders should invite foreign investors to invest here. The BSEC is continuously working to make the investment environment easier and transparent in the market.