Nazmul Ahsan
The Ministry of Finance (MoF) has asked the securities regulator to re-design or formulate afresh a number of critical capital market-related policies relating to pre-initial public offering (IPO) and placement shares and to bring about changes in the existing rules on preferential shares, right shares and book building method, official sources said.
It has also asked the regulator to undertake an initiative for enforcing an uniform face value of all listed shares and to form a committee to fix the indicative prices of shares.
The ministry on Sunday instructed the Securities and Exchange Commission (SEC) to complete such tasks through issuing seven separate directives in this connection, a top ministry official said.
It has also asked the regulator to undertake an initiative for enforcing an uniform face value of all listed shares and to form a committee to fix the indicative prices of shares.
The ministry on Sunday instructed the Securities and Exchange Commission (SEC) to complete such tasks through issuing seven separate directives in this connection, a top ministry official said.
The move has been taken as part of a reform programme to overhaul the SEC through addressing the existing institutional and regulatory loopholes.
The reform programme will largely be based on the recommendations of the report of the probe committee on the recent share market scam.
"It is only a start following the reconstitution of the SEC. We will formulate new policies and amend the existing regulations relating to the capital market soon to help promote good corporate governance that will have a positive impact on the country's stock exchanges," a top MoF official said.
"The alleged malpractices of big players and manipulations by the vested quarters in the share market cannot be stopped until sound and pragmatic policies are put in place," the official added.
Currently, there is no set of clear regulations about who will get the private placement of shares under any IPO and this situation led to massive irregularities in the capital market in recent times.
In its report, the probe committee cited a good number of malpractices that took place in the stock market during the last two years because of unethical practices relating to private placement of shares.
Officials in the MoF said malpractices and unethical businesses ruled the roost in the capital market in the name of pre-IPO placement of shares as there was no criteria for deciding the eligibility about offering such private placements.
Due to the negligence of the SEC, the regulation that permits 40 to 50 per cent placement of pre-IPO issues, depending on the size of the paid-up capital of a company has been largely violated, the official said.
"Given the magnitude of pre-IPO business, its share must be reduced to 15 to 20 per cent of the paid-up capital," the official, preferring anonymity, said.
The MoF officials said a good number of companies having weak fundamentals were responsible for the "loot" of billions of takas in the capital market during the recent period.
Those responsible for this took the advantage of loopholes in the existing regulations about right shares and also in the absence of standard regulations for issuing of preferential shares, they added.
Those responsible for this took the advantage of loopholes in the existing regulations about right shares and also in the absence of standard regulations for issuing of preferential shares, they added.
"Massive changes are required to update the regulations concerning issues of right shares and to formulate effective procedures and policies for issue of preferential shares so that manipulation and money-looting are completely stopped," another MoF official said.
He said the existing book building method only benefits the unscrupulous companies and this system needs to be properly amended in the light of the recommendations of the probe committee, headed by Mr Ibrahim Khaled, a renowned banker.
Sources in the capital market, said the move of the government is welcome and it to be implemented soon. They expressed the hope that the SEC would be able to implement the latest directives of the MoF.
He said the existing book building method only benefits the unscrupulous companies and this system needs to be properly amended in the light of the recommendations of the probe committee, headed by Mr Ibrahim Khaled, a renowned banker.
Sources in the capital market, said the move of the government is welcome and it to be implemented soon. They expressed the hope that the SEC would be able to implement the latest directives of the MoF.
A newly-appointed member of SEC said, they are drawing up the roadmap and doing the ground work towards complying with the directives of the MoF.
"The task is huge. We are finalising our course of action to implement the latest directives of the government including performing the task of making further investigations into 14 major alleged irregularities, as were identified by the probe committee and later asked by the MoF," a Member of the SEC, told the FE on Monday.
Source: Financial Express (31 May 2011).
