DSE receives Tk 680m loss claims in Moshihor Securities fraud case

The Dhaka Stock Exchange (DSE) has received complaints of losses amounting to Tk 680 million from clients of Moshihor Securities, which embezzled investors' shares and cash more than a year ago by using duplicate software.

Md Shafiqur Rahman, deputy general manager of the prime bourse, said about 7,000 of the 44,000 victims had submitted their claims by October 30 as the exchange moved to compensate them.

At the same time, about 1,600 clients sought the transfer of their shares by submitting the prescribed Central Depository Bangladesh Ltd (CDBL) Form-16 from Moshihor Securities to other market intermediaries.

Moshihor Securities misappropriated Tk 686 million from its consolidated customers' account and siphoned off Tk 923 million by selling clients' shares. Clients remained unaware of the illegal acts as the broker generated false data on their investment status by using duplicate back-office software and distributing it to them.

In early October this year, the Dhaka bourse urged clients of the errant brokerage firm to submit complaints over the loss of money and shares, along with documentary evidence, by the end of the month.

The DSE also sought applications from the firm's BO (beneficiary owner's) account holders for transferring their holdings to other brokerage firms.

Abul Kalam, a director and spokesperson of the Bangladesh Securities and Exchange Commission (BSEC), said the prime bourse had been collecting data on the assets of Moshihor Securities' clients.

Affected investors will be refunded from the investors' protection fund, he said, adding that claims would be settled on a pro-rata basis, as the total misappropriated amount would be much higher than the money available in the protection fund.

Currently, there is a provision that 25 per cent of the interest earned against funds in consolidated customers' accounts (CCA) must be deposited into the protection fund, effective from January this year.

The financial fraud committed by Moshihor Securities came to light in August last year after the DSE unearthed a deficit of Tk 686 million in the CCA.

A further probe found that the brokerage firm had misappropriated Tk 1.61 billion in total in shares and cash.

The bourse suspended trading at the firm on August 19 last year, along with its DP (depository participant) licence.

Meanwhile, the BSEC imposed travel bans on the broker's managing director, directors, and CEO.

Some of the affected investors earlier sat with the brokerage firm and pressured it into signing a pay-back deal. The firm at the time promised to repurchase shares that it had unlawfully sold.

But not a single client has received shares or money.

One of the victims of the financial fraud is Iftikhar Ahmed Chowdhury. He opened a BO account with Moshihor Securities around 15 years ago and invested around Tk 3.7 million in stocks.

In August last year, he went to the brokerage house to transfer his shares upon hearing about the shortfalls in the CCA but discovered that his assets had already been liquidated.

One of the directors of Moshihor Securities - Sheikh Mogol Jan Rahman - signed an agreement with Chowdhury, promising that his organisation would repurchase shares and transfer them to a linked account of Chowdhury at Bank Asia Securities Ltd in three phases by mid-October last year.

Chowdhury is still waiting to get back his investment.

There were at least five other major cases of money embezzlement by brokers.

Such frauds would not be repeated in the future, said the BSEC spokesperson, as almost all brokerage firms had been compelled to use uniform, tamper-proof back-office software - a mechanism deemed crucial to prevent digital frauds.

In February 2022, the securities regulator asked all brokerage firms to install the software against the backdrop of rampant fund embezzlement.

Between 2019 and 2021, major scams were committed by Crest Securities, Dawn Securities, Tamha Securities, Banco Securities, and Shah Mohammad Sagir. Investors lost more than Tk 3 billion to those scams.

Trading in these firms has remained suspended.

The misappropriation of funds and shares by Moshihor Securities is the latest incident that was exposed in August last year after the new securities commission led by Khondoker Rashed Maqsood took charge.

Law enforcement agencies, at the request of the securities regulator, imposed travel bans on Moshihor Securities' CEO Ziaul Hossain Chisty, Managing Director Moshihor Rahman, and Director Sheikh Mogol Jan Rahman on August 30 last year.

"Travel bans on the directors of Moshihor Securities have remained effective," said the BSEC spokesperson.

The Anti-Corruption Commission (ACC) is also investigating Moshihor Securities under the Money Laundering Prevention Act.

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