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Will SEC be rejuvenated?

The Ministry of Finance finally published the enquiry report about the recent share market crash. The enquiry team was led by Ibrahim Khalid, an astute banker. Of course, the publication of the report was delayed by a few weeks. This triggered a lot of hiccup in the media- both electronic and print.
This was also aggravated by the comments both from the Finance Minister and the Chairman of the Enquiry Committee which were premature and unwarranted respectively. Still we thank the Honorable Minister for placing the uncensored report in the website.
The finance minister has also assured that the recommendations will be duly pursued. Securities and Exchange Commission (SEC) had been severely criticised both by the committee and also outside. The government has already appointed a new chairman of the SEC. The report has been published. We are sure that interested persons will look into. Definitely, views, suggestions and further recommendations will flow from the share market guru through media and the government will take note of it. Any enquiry report is likely to have some limitations. It may demand further enquiry. Some recommendations may be practical and some may originate from the prescient views. The report should be considered as a base upon which further actions are likely to be taken. BNP, the main opposition party, has stated that it has rejected the report.
The question of acceptance or rejection of such kind of report can not be explained in the way BNP did. This reminds me of a joke. After a football match a gentleman from the losing side said that he would protest. When asked to explain the ground for protest, he replied that he was protesting on the Mohammedan Sporting Ground i.e. the ground where he was standing. The entire report will not even be accepted by the government. The scrutiny on veracity is there.
However, if BNP thinks that the report has been one sided or truth has been hidden, they should have specially mentioned these issues. Of course, there is no surprise in it. In our political culture, there is not a single example to be cited where both the government and the opposition have acted in unison. Now let us come to the issue of SEC. The stern reality is that people do not have an iota of confidence upon SEC, rather wide spread dudgeon has been observed among all sections of people during the recent crisis. SEC is to gain confidence, but it will not be an easy task. It will have to walk miles before it finds thus Holy Grail – the people’s confidence. The crisis of confidence is not new, it is decade long. From the inception, SEC has developed a psyche that stock exchange is the king pin of the securities market and SEC should revolve round it. In 1993, SEC was established. Under the Securities and Exchange Commission Act, share broker i.e. DSE members were to obtain licence from SEC.
SEC issued a circular asking the members to convert memberships into corporate ones and apply. DSE refused to comply with this requirement. A statement was created. After discussion incognito, it was decided that the members would two words against their names such a ‘& Co’ and would qualify for obtaining licences. Recently there has been further deterioration. SEC began to act as the marketing agent of both Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) of course, there is the story behind the story regarding this phenomenon. Both DSE and CSE are politically powerful. A large number of MPs and even some Ministers of the cabinet simultaneously remained members of the bourses. This has acted as a shield against any kind of political or government action right or wrong. Rather, it has helped in gaining an undue advantage. It is expected that the new mandarins of SEC will realise the issues.
SEC will have to act rising above any kind of pressure from any quarter. But the ground reality is that it will be difficult for SEC to defy the Ministry of Finance. Under section 16 of Securities and Exchange Commission Act 1993, the government may issue any directive or special instruction, of course there is the proviso that before doing the government will seek opinion from the commission. But the unscrupulous bureaucrats will know how to bypass the proviso. Moreover, any affiliated body or organisation of any ministry will ever think of entering into a scrimmage with the parent ministry. Probably two years back, SEC issued an instruction to the stock exchange that any member seeking election for the post of a director of the stock exchange will favor to obtain clearance from SEC. It was not only a blatant violation of the companies act, but also disgraceful. On query, it was learnt that SEC issued this direction being instructed by the Ministry of Finance. It is expected that the ministry will not do so in future. If may be mentioned that the aggrieved persons moved the Honorable High Court Division and got the relief. That should also be a lesson for the ministry and SEC. Under the Securities and Exchange Commission Act, all powers lie with the commission and not chairman. It has been done so because an active commission is not likely to sink into the quicksand of misdeeds or corruption which an individual can. There should be an active commission. At present, the commission consists of one chairman and four members. This should suffice at the moment. What is needed is the monitoring of the activities of the commission. The Ministry of Finance may have a monitoring cell of its own. But hardly will it be effective. As customary with any government body, this monitoring cell will suffers from redtapism and secrecy mania. An advisory on consultative committee should be formed consisting of members from various professions such as business person, academician, stock exchange member, media person and legal expert. The committee will set at least once a month and its views and observations shall have to be made public. Past reports reveal that much of the maladies of SEC were caused by the action of an individual – be a chairman or a member. All decisions will originate from the commission. Post facto culture should be avoided.
→ Syed Mahbubur Rashid(The writer is a former secretary of the Dhaka Stock Exchange and an analyst.)

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