Stock brokers refund substantial amount of fund to investors' accounts

The securities regulator has compelled many stock brokers to pay back a substantial amount of fund to the designated investors' accounts that they used defying the existing rules.

In a year-long drive of securing investors' interests, the Bangladesh Securities and Exchange Commission (BSEC) has brought back above Tk 882.25 million to investors' consolidated customers' accounts.

"Only the investors are the owners of the funds deposited in consolidated customers' accounts. The BSEC has brought back this money imposing penalties and punishments," said Mohammad Saifur Rahman, a BSEC executive director.

He said some stock brokers, also known as TREC (Trading Right Entitlement Certificate) holders, set aside investors' funds to meet their purposes such as maintaining administrative costs and fixed deposit receipts (FDR).

"Investors' risks will trigger following removal of their funds, as the paid-up capitals of the stock brokers still remain insignificant. That's why, the BSEC has secured investors' interests through administrative ways," Rahman said.

Apart from removing investors' funds, the directors of six brokerage firms of both the bourses took margin loans worth over Tk 70.87 million from their companies defying existing rules.

This amount has also been adjusted into the companies' accounts through administrative actions taken by the securities regulator.

According to BSEC information, 26 stock brokers of the Dhaka and Chittagong Stock Exchange had set aside above Tk 882.25 million from the consolidated customers' accounts.

Of 26 stock brokers, 21 were from the Dhaka Stock Exchange (DSE) who used investors' money worth above Tk 781.05 million.

Of the DSE brokers, 16 adjusted funds worth above Tk 281.82 million into the consolidated accounts through discussion meetings conducted by the securities regulator.

Remaining five brokers adjusted above Tk 499.22 million following strong warnings issued by the BSEC.

Another five stock brokers of the Chittagong Stock Exchange (CSE) used investors' funds worth above Tk 101.20 million from the consolidated customers' accounts.

Three stock brokers adjusted above Tk 26.02 million, while remaining two stock brokers adjusted over Tk 75.18 million through the regulatory directive.

According to BSEC information, seven TREC holders set aside the greater portion of the investors' funds which were deposited into consolidated customers' accounts to purchase the securities.

Of the DSE TREC Holders, Shyamol Equity Management removed above Tk 226.44 million, Joytun Securities International 97.77 million, Sharp Securities Tk 121.97 million, Latif Securities Tk 15.68 million, and Premier Leasing Securities Broking Tk 37.43 million.

Of the CSE TREC holders, S. R. Capital Securities and Eastern Shares and Securities used investors' funds worth Tk 32.47 million and Tk 42.70 million respectively.

These seven TRECH holders of both the bourses have removed an aggregate amount of fund worth over Tk 574.40 million and the whole amount was adjusted into investors' accounts following the regulatory directives.

As per the existing rules, investors' funds are deposited into a single consolidated account maintained by each TREC holders of the stock exchanges.

The stock brokers are allowed to remove only the broking fees from such accounts against sales and purchases of securities conducted by investors.

BSEC executive director Mr. Rahman said the securities regulator conducted investigations time to time following shortages in consolidated customers' accounts.

He said the securities regulator is the place of investors' protection and that's why sometimes the BSEC has taken decision of canceling the licenses of some errant stock brokers due to their failures in adjusting the investors' funds.

"Finally, the investors' funds were adjusted into their designated consolidated accounts," Rahman said.

The BSEC officials said they settled 78.21 per cent complaints for the fiscal year 2018-19 and took enforcement actions to settle some other complaints.

"On completion of enforcement actions, the rate of quick settlements of investors' complaints will rise to 92.07 per cent for the fiscal year 2018-19," according to BSEC officials.

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