3 years ago

BO accounts decline 9.0pc in outgoing fiscal year

Non-payment of fees, depressed mkt outlook main reasons

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The number of beneficiary owners' (BO) accounts dropped 9.10 per cent in the outgoing fiscal year (FY) 2019-20 due to non-payment of annual renewal fees, strict regulatory move and depressed capital market outlook.

The total number of active BO accounts came down to 2,555,365 on July 1, 2020 which was 2,809,850 on June 30, 2019, according to data from the Central Depository Bangladesh Ltd (CDBL), which preserves electronic data of all individual and institutional investors.

Some 254,485 BO accounts were closed in the outgoing FY, CDBL said.

To trade in the secondary market and apply for primary shares, an investor has to open a BO account with the CDBL through a depository participant, which is usually a stockbroker or a merchant bank.

Market operators said the market has been in the doldrums throughout the FY 2019-20 amid investors' confidence crisis, liquidity crunch and foreign investors' sell-off while Covid-19 outbreak exacerbated the situation.

The Covid-19 outbreak and its possible impact on the country's overall economy took a heavy toll on stock prices, which prompted securities regulator to impose circuit breaker on March 19 to curb the free-fall.

DSEX, the prime index of the Dhaka Stock Exchange, plunged 1,432 points or 26.56 per cent in the outgoing FY to settle at 3,989.

Market capitalisation of the prime bourse also plunged 22 per cent in the outgoing FY to Tk 3,119 billion on June 30.

"Many investors left the market as they incurred huge losses for the depressed state of the stock market, while some squeezed their investment into one or two portfolios," said a merchant banker.

Many also closed down their accounts for the shrinking initial public offerings (IPO) in recent times as many investors open BO accounts only to apply for IPO shares, he said.

Only two companies and one bond raised Tk 3.07 billion in the outgoing FY year while 11 companies and two mutual funds had raised Tk 5.71 billion in the FY 2018-19.

The officials familiar with the matter said a good number of BO accounts were closed during the period due to non-payment of maintenance fees, regulatory move taken to ensure compliances and bearish market outlook.

Bangladesh Securities and Exchange Commission issued a circular in June last year to remove irregularities occurred during opening accounts as many BO accounts were opened using same national ID number, mobile number and bank account.

"The depository participants (DPs) had to close many unlawful BO accounts following the BSEC's directive. That's why the number of active BO accounts dropped significantly," the CDBL official said preferring anonymity.

Of the total number of active BO accounts, male investors own 1,865,296 accounts while female investors 676,702 and company 13,367 as of June 30, 2020, the CDBL data shows.

Currently, there are 1,622,657 individual accounts and 919,341 joint accounts, the CDBL data shows.

The non-resident Bangladeshis own 144,179 BO accounts opened to conduct share transactions or to apply for IPO shares. However, half the BO accounts exist in name only.

Those accounts have no role in daily share transactions as they have either zero balance or have never been used in share trading in the secondary market.

This has been happening over the last five years, the CDBL official said.

In 2016, the BSEC reduced the annual renewal fee to Tk 450 from Tk 500 for each BO account with the aim of reducing financial burden on investors. Of the Tk 450, the CDBL gets Tk 100, while the government, DP and BSEC get Tk 200, Tk 100 and Tk 50 respectively.

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