Reduced IPO quota for general investors

Number of BO accounts remains unchanged

FE Report | Published: October 21, 2018 10:19:15 | Updated: October 31, 2018 12:11:20


Picture used for illustrative purpose only

The number of BO (Beneficiary Owner's) accounts remained almost static in last ten months due to reduced IPO (initial public offering) quota for general investors, stock brokers said.

They said most BO accounts opened by many general investors are mostly used to apply for IPO shares.

"The IPO quota for general investors has been reduced both in public issue rules. That's why, many general investors feel no interest to open new accounts," said Mostaque Ahmed Sadeque, the president of DSE Brokers Association (DBA).

According to information of Central Depository Bangladesh Limited (CDBL), the number of active BO accounts stood at above 2.71 million on October 18, 2018.

Of total BO accounts, males own above 1.98 million accounts, females above 0.72 million accounts and companies 12,175 accounts.

The number of active BO accounts was above 2.72 million on December 31, 2017.

As a result, the number of accounts declined 0.73 per cent or 0.02 million during January, 2018 to October 18, 2018.

The number of accounts was above 2.78 million as of May 29, 2018.

Later, the active accounts declined marginally and finally stood at above 2.71 million as of October 18 last.

DBA President Mostaque Ahmed said maintaining BO account is a matter of cost.

"That's why many investors do not renew their BO accounts as their opportunity of getting IPO shares has reduced due to quota increased for eligible investors (EIs)," Mostaque said.

The DBA president said they have already drawn the attention of the securities regulator to look into the quota facility by many EIs without conducting their own job.

"Merchant banks are also eligible to avail IPO quota facility. Many merchant banks only apply for IPO shares without brining any issue in the market," DBA president said.

On October 10 last, the chairman of the securities regulator Professor M Khairul Hossain warned different EIs of 'scrapping' their IPO quota if they fail to carry out stipulated roles.

At a programme organised by the DSE, Khairul said the IPO quota will be scrapped if the EIs quote unjustified price in determining the cut-off price of shares of a company going public under book building method.

The chairman also warned the stockbrokers of scrapping their IPO quota if the fund of consolidated customers' account is set aside for their (brokers) own investment.

"The IPO quota of a stock dealer will be scrapped if there is no transaction in dealers' account."

The chairman said a merchant bank, also the issue manager, will not be entitled to the quota facility if it fails to bring two IPOs in one year.

Under the revised fixed price method, general investors are eligible to apply for 50 per cent of the shares of a company going public.

Previously, the general investors were able to apply for 80 per cent of the shares.

Under the book building method, eligible investors are allowed to purchase 60 per cent of a company going public.

And general investors and non-resident Bangladeshis are allowed to apply for remaining 40 per cent shares.

After June closing, a BO account is closed due to non-payment of annual account maintenance fee.

When it comes to accounts holding securities, they are suspended instead of closure.

Such accounts are reactivated, when the account holders deposit the annual fees.

A BO account holder has to deposit Tk 450 per year as the maintenance fee.

Of Tk 450, Tk 200 goes to the public exchequer, Tk 100 to the depository participants, Tk 50 to the securities regulator and the remaining Tk 100 to the CDBL.

mufazzal.fe@gmail.com

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