Bangladesh Securities & Exchange Commission (BSEC), watchdog of country's capital market, has completed 25 years of journey. To mark this milestone, BSEC has chalked out an elaborate programme to observe the silver jubilee ceremony, to be inaugurated by the Prime Minister on September 12, 2018.
This regulatory body, established on June 08, 1993, was initially named as Securities and Exchange Commission (SEC). Subsequently, the name got changed to BSEC on December 10, 2012, probably to avoid confusion with SEC in the US which is the most powerful capital market regulatory body in the world and people across the world know that SEC means US SEC.
BSEC started with very limited capacity as it was run by a handful of government officials who mostly came on deputation from different government services. Moreover, during that time the country's capital market was not so big, and so the necessity of very effective and efficient capital market watchdog was not felt at all. In 1996, when country's capital market-- both primary market and secondary market-- experienced setback following massive crash, the authorities felt the need of having an efficient capital market watchdog.
STRENGTHENING BSEC: The government took various programmes to strengthen the country's capital market including restructuring and empowering Securities & Exchange Commission. Many projects for strengthening the capital market were undertaken with financial and technical assistance from ADB (Asian Development Bank) and World Bank. As a part of these projects, capacity of the organisation improved substantially with the creation of full Commission comprising one Chairman and four Members. The organogram was set up with a good number of officers ranging from Deputy Director to Executive Director who were mostly recruited from professionals with sound background. Consultants from World Bank and ADB were assigned with the responsibility of hiring officers for different levels through open competition and many highly qualified professionals from the private sector joined the organisation. I myself was one of those fortunate officers and feel proud of having the opportunity to serve this organisation for more than five years. Apart from periodic offsite and onsite training imparted by many foreign consultants, officers were regularly sent to many developing and developed countries to have practical knowledge on how capital market watchdog of those countries perform. During that period, the Chairman of SEC was a very seasoned bureaucrat, M.A. Syed who subsequently became Chief Election Commissioner. Although, a bureaucrat, he emphasised on directly recruiting officers from the private sector through open competition. From some sources he came to know that FSB (Financial Service Board), capital market watchdog in South Africa, conducts surveillance without using technology and he immediately arranged to send three officers, including myself, to FSB in South Africa for gaining practical knowledge about surveillance activity on transaction in bourses. Our Surveillance Department was not technologically well equipped at that time.
BSEC IS RUN BY PROFESSIONALS: Alongside streamlining as well as empowering the BSEC, measures were taken to turn it into a professionally run one. In our country, all government organisations and public enterprises/corporations are mostly run by bureaucrats. Initially, BSEC had to go through the same practice because all Commission members were appointed from retired secretaries. But capital market is completely a technical area where subject-based knowledge is critically important. Change eventually came. For more than one decade now, the Chairman of BSEC has always been appointed from professionals and even some members have come from the private sector. Present Chairman, Prof. Dr. M. Khairul Hossain, is in this position for more than five years. He is a professor of the Finance Department of Dhaka University and a very professionally knowledgeable person. Under his dynamic leadership, country's capital market has achieved many successes although stock market crash in 2011 could not be avoided.
Ups and downs in the stock market are a very common phenomenon for which regulatory body should not always be blamed although the onus always lies with it. We have to keep in mind that bull and bear live together in the bourses; so investors must be well aware of that and be very careful about investing in country's secondary market.
STILL LONG WAY TO GO: The BSEC has completed 25. During this time, the organisation's capability has increased manifold, and its role and responsibility has increased considerably. It is now capable of playing the dual role of supporting and regulating the capital market. Many rules and regulations have been created for supporting the capital market development and protecting investors. Moreover, during this period, country's capital market has tremendously developed as its market capitalisation and number of listing have enormously increased. Even the depth and complexity of the market has deepened too.
However, there is no room for complacency, as there is still a lot to be done. Country's capital market will have to move forward in line with economic growth, so necessary supporting and regulatory role from the BSEC will have to be provided.
DIVERSIFICATION NEEDED: More than two decades have elapsed since emergence of a vibrant secondary market, but stock remains the only investment instrument in the bourses. Time has now come to bring diversification in the market. BSEC and Stock Exchanges should work together to bring some derivative products in the market.
Secondly, secondary market for bond trading has not come into being. For efficient and healthy financial market comprising both money market and capital market, presence of effective bond market is a must. Needless to say that bond market provides alternative sources of fund and investment for both borrowers and investors. The BSEC should actively consider establishing a bond market.
Although our stock market has tremendously developed in terms of both market capitalisation and number of listing, the role of mutual fund is almost absent. From the very beginning, this product has not been gaining popularity among the investors and even among financial intermediaries. We have to keep in mind that without mutual fund, small investors' interest cannot be protected. It is undeniable that mutual fund will not fetch abnormally high profit but will provide a sort of certainty of steady income.
NEED FOR PROFESSIONAL ADVISERS: In our country services of professional financial advisers are rarely available. Investors go to the brokerage house, informally discuss and instantly take their investment decision. This, no doubt, is a risky practice. Even some investors sit in front of the trading screen and take their decisions. So, BSEC should consider licensing programme for professional investors who will be the only authorised persons to provide investment advice to the investors. Even investors will have to go through the licensed investment advisers.
Alternative online trading platform can be created for those investors who will consider themselves competent enough for taking investment decisions so that respective investment house does not have to bear the blame or responsibility of investment loss.
Capital market is a fast moving and rapidly changing investment environment where the nature, scope and dimension of the market always change.
Nironjan Roy is a banker based in Toronto, Canada.
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