Market needs immediate actions, not endless debates: Experts

There is a notable overlap between terms of references (ToRs) set for two separate reform committees of the country's capital market, posing a question as to whose recommendations will get priority during enforcement.

Also, there are too many ToRs to address by the taskforce formed by the Bangladesh Securities and Exchange Commission (BSEC) that market operators and even taskforce members think it will be almost impossible for the committee to work on every issue and submit recommendations quickly.

The BSEC formed a five-member taskforce in October last year to advise the market watchdog on how to boost investor confidence and ensure governance of international standards to facilitate the development of the market.

Five months later in March this year, the Financial Institutions Division (FID) of the finance ministry formed another reform committee for the same purpose - getting expert suggestions on how to help the secondary market flourish. This time the chief adviser's special assistant Dr. Anisuzzaman Chowdhury was made the head of the committee.

The directives issued to the committees show overlapping responsibilities.

For example, both the taskforce made by the BSEC and the committee of the FID are tasked with submitting recommendations on how to strengthen the securities regulator.

"Making recommendations regarding market operations and rules and regulations are totally different from that on strengthening the securities regulator," said a member of the focus group of the BSEC taskforce, preferring anonymity.

"From our experience, we can make recommendations on market operations, rules and regulations. But we don't know exactly how the BSEC operates," he said, adding that the committee formed by the FID might be eligible to advise on reforms needed to the securities regulator.

Speaking on overlapping ToRs, former BSEC chairman Faruq Ahmad Siddiqi said, "The market will see no development even if four other committees are formed."

The regulator could fine-tune rules and regulations, holding discussions with stakeholders. "Instead, the Commission has been waiting for months for reports of the reform committees," Mr Siddiqi said.

Meanwhile, the BSEC taskforce on Sunday submitted to the regulatory body its final reports on mutual funds and margin rules. It is scheduled to brief on the reports today (Monday) at the BSEC office.

Wishing not to be named, another BSEC taskforce member said it would take a long time to complete reports on all 17 ToRs covering the capital market. "Members of the taskforce and its focus groups have their own business in their respective fields [alongside working on market reforms]."

According to Md. Ashequr Rahman, managing director of Midway Securities, reforms would likely be more effective if they are initiated from the top of the government. He emphasized that the committee made by the FID might play a greater role in bringing changes to the secondary market.

In its order meant for the taskforce, the BSEC said other important areas might be incorporated for reforms, subject to discussions between the regulator and the taskforce.

In the meantime, six months have passed and the BSEC taskforce submitted three draft reports on mutual fund (MFs), IPO (initial public offering), and margin rules to the securities regulator. Amid them, two reports have been finalized.

The BSEC has not fixed any timeframe for the completion of the job given to the taskforce.

Talking to the FE correspondent over the phone, Mr. Rahman, also a member of the focus group of the taskforce, said he had warned the taskforce at the very first meeting that some ToRs did not demand attention for short-term benefits.

"So, we began prioritizing the TORs that would address the market's pressing needs."

Mr. Rahman added that the ToRs of the BSEC taskforce should be narrowed, focusing on speedy and effective execution of its recommendations.

Stakeholders have repeatedly said they are frustrated over inaction of the securities regulator and that immediate actions and day-to-day affairs are important to restore investors' confidence.

"But the BSEC is awaiting recommendations of the taskforce," said a stock broker on condition of anonymity.

Pessimism surrounding the role of the regulator is accompanied by a sharp fall of the index.

The broad index of the Dhaka bourse lost 4 per cent or 210 points in 10 sessions since April 10. During the period, the market cap was eroded by 1.16 per cent or Tk 78 billion to Tk 6.64 trillion.

Mr Siddiqi put the blame on the BSEC's failure to bring harmony in its internal operations.

"The recent clashes that took place between the commission and BSEC officials delivered a wrong message to the market. The regulator also has shortcomings in its relationships with the stakeholders," he said.

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