Bangladesh Securities and Exchange Commission (BSEC) is set to bring some changes in existing regulations to accommodate junk stocks in the main board from OTC market.
The commission considered taking back the companies in the main market due to their improving corporate performances.
It has recently been noticed that there were tendency about coming back of non-performing companies listed with the OTC (over-the-counter) market to the main market, according to the minutes of the commission meeting held on Tuesday.
In this perspective, the commission has decided to scrutinise the applications filed by such companies for listing with the main market, aiming at protecting the investors’ interest, it said.
To formulate a guideline, a three-member panel headed by its executive director Anowarul Islam has been formed. The regulator has asked the committee to submit a report to the commission by November 15.
The BSEC’s move comes five months after Wata Chemicals received Dhaka Stock Exchange (DSE) nod for re-listing in the main market as the company became regular in holding annual general meetings (AGMs) and paying dividends to shareholders.
The OTC market is a separate platform for the companies not in operation, holding AGMs, declared dividends or converted their paper shares into electronic ones.
Listed with the stock market in 1992, Wata Chemicals started holding AGMs regularly and paying out dividends to shareholders a year after it was de-listed from the main market. The company disbursed 30% stock dividends in 2013, 20% stock dividends in 2012, 12% cash dividends in 2011 and 10% cash dividends in 2010.
On its debut day in the main market after re-listing, its share price had skyrocketed by more than eight times to Tk487 a share.
Ex-BSEC chairman Faruk Ahmed Siddiqi lauded the commission’s move saying the new guideline might prevent repetition of Wata Chemicals that rose irrationally in its first trading day after re-listing.
He noted that there was a tendency of manipulation centering a company that was transferred to the OTC market from the main market. “New norms should focus on curbing manipulation.”
Presently, 66 companies are listed with the OTC market. Under the OTC system, interested buyers and sellers announce prices and the number of shares to be traded through their brokerage houses. Transaction takes place only when the offer price by buyers and sellers match.
In September 2009, the OTC market was introduced on the Dhaka Stock Exchange (DSE) to trade junk shares aiming at bringing transparency, enhancing efficiency and protecting the interest of the retail investors.
Before the OTC was introduced, the prices of many shares had increased abnormally, although they did not declare dividends and some could even not be traced physically by the exchange management.
But share trading of those companies was taking place, as many retail investors were unaware of the companies’ latest status.
In the last four years, 11 companies returned to the main trading floor after converting their physical shares into electronic shares or improving corporate performance.
