Around 0.26 million BO (beneficiary owner's) accounts were closed in the past first two months of the current fiscal year (FY) due mainly to non-submission of renewal fees and revised public issue rules.
Investors are required to renew their BO account every June for a certain fee. If an investor does not renew or deposit the annual fee with the DP (depository participant) the account is closed automatically.
"The revised public issue rules has reduced general investors' possibility of getting IPO shares as the quota of institutional investors has been expanded which is also a reason for the closure of BO accounts," said an analyst at a leading brokerage firm.
He noted that the reduced possibility of getting IPO shares prompted many investors to close their BO accounts.
Under the revised fixed price method, general investors are eligible to apply for 50 per cent shares of a company willing to go public. The eligible institutional investors (EIIs) are allowed to apply for remaining 50 per cent shares.
Previously, the general investors were able to apply for 80 per cent shares under the fixed price method.
Under the revised book building method, the EIIs are eligible to apply for 60 per cent shares, NRBs for 10 per cent and general investors for remaining 30 per cent.
The total number of BO accounts stands at around 2.66 million as of August 31, 2017, which was 2.92 million in June 30, 2017, according to statistics available from the Central Depository Bangladesh Limited (CDBL), which preserves electronic data of all individual and institutional investors.
In fiscal 2016-2017, some 0.22 million BO accounts were closed.
At present, an investor has to pay Tk 450 per annum to keep the account active.
Of the Tk 450, the DP gets Tk 100, the CDBL Tk 100, government Tk 200 and the Bangladesh Securities and Exchange Commission Tk 50.
To trade in the stockmarket and apply for primary shares, an investor has to open a BO account with the CDBL through a DP, which is usually a stockbroker or a merchant bank.
Many BO accounts that were opened only to participate in the initial public offerings (IPO), but most of the accounts remain empty or share-less after unsuccessful applications.
“Maybe the IPO applicants are not willing to continue their BO accounts. It is logical that investors will not want to spend extra money to keep their BO accounts operative,” said a stockbroker.
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