Bangladesh Securities and Exchange Commission (BSEC) on Thursday approved a number of documents to facilitate demutualisation of the country’s two stock exchanges, including a 13-member board each.
Of the 13-member board with three-year term, seven directors will be independent, four from shareholders and one from strategic shareholder. In addition, the chief executive officer of a stock exchange will act as an ex-officio director having voting rights.
The post of strategic shareholder director will remain vacant as long as eligible strategic shareholder is not found. Under a “Fit and Proper Test” criteria mentioned in the demutualisation plan, independent director will be selected from the board of directors of the bourses.
After demutualisation, a post of chief regulatory officer will be created, who will look after the regulatory affairs division of a stock exchange.
“New era began with the approval of demutualisation plan in the history of Bangladesh capital market,” said BSEC in a statement. The demutualisation is aimed at separating the managements from the ownerships with a promise to bring transparency to the stock market.
The most significant benefit of demutualisation is that the supervision and enforcement in stock exchanges will not be in the hands of the brokers, said an official. Besides, a demutualised stock exchange will be in a better position to attract international strategic partners and good quality issuers, he said.
According to the Act, stock exchange members or brokerage houses will hold 40% after the demutualisation of a bourse. The rest 60% will be kept for trading right entitlement certificate holders, strategic investors and individuals.
Strategic investors will not be allowed to hold more than 25% stake of a stock exchange, while no individual will hold more than 5%.
The two stock exchanges submitted their demutualisation plan within the deadline of July, 2013 to prepare the basic documentation, which included revaluation of assets and liabilities, development plan and papers regarding segregation of regulatory and commercial functions.
The BSEC will send the approval documents to the stock exchanges within a week, sources said. “From the date of reception, we will call annual general meeting for beginning the demutualisation process,” Dhaka Stock Exchange president Ahsanul Islam Titu told the Dhaka Tribune on Thursday.
He said the law would bring more transparency in capital markets which would lead to a higher degree of trust among the investors. “This is the beginning of a new era for stock markets but the results will be visible in a short period of time.”
After AGM, the stock exchange will send the demutualisation documents to the Registrar of the Joint Stock Companies and Firms for registration. After registration, the stock exchanges will turn into a public limited company. Then, the bourse will form a 13-member board in line with the demutualisation scheme.
Asked about the approval of other documents, including asset valuation, BSEC spokesperson Saifur Rahman said the commission has approved the documents bringing necessary amendments in the scheme proposed by the stock exchanges. “Amendments of other documents will be disclosed gradually,” he said. According to the proposed scheme, the DSE has been valued at around Tk42bn and the port city bourse at Tk6.35bn.
