The Bangladesh Securities and Exchange Commission has decided to rejuvenate inactive corporate finance departments (CFDs) of the stock exchanges to detect extensively deviations and flaws in the financial statements the listed companies submit to the BSEC and the bourses.
The commission made the decision after a BSEC investigation team found that the corporate finance departments of the Dhaka Stock Exchange and the Chittagong Stock Exchange remained idle since their inception, BSEC officials said.
Acting on a BSEC move in 2011, the DSE formed Corporate Governance Financial Reporting Compliance and the CSE formed Corporate Finance Department in 2012 to work with the BSEC in tandem to find out anomalies in the financial statements the listed companies submit, they said.
The probe conducted by the regulator revealed that the departments remained inactive due mainly to lack of skilled manpower.
There was no chartered accountant in the departments of the bourses to run those efficiently, the investigation found.
The bourses opened the CFDs to tackle any risk in the capital market and reduce malpractices by the listed companies with their financial reports.
The listed companies submit each year four financial statements — three quarterly reports and one annual report — to make their financial position public.
According to stock market experts, investors make their decisions on trading shares of the companies mainly based on their financial disclosures that need to be truthful and precise.
So far, the bourses have failed to make any difference in terms of monitoring the malpractices including deceptive financial reporting.
The BSEC investigation team found that the CSE has been running its CFD with just one official and the DSE with seven officials.
According to the BSEC team, even seven officials are not enough to run such a crucial department.
The team also raised question about the capability of the officials.
The panel said that the bourses required at least 10-14 efficient officials to run their CFDs.
Due to the limitation of manpower in the commission, the commission figured out the option of using the bourses’ departments for the purpose of checking the listed companies’ financial statements to find wrongdoings.
The country’s capital market has seen large changes, not just in regulations in the related regulatory space, but also in the complexity and size.
The financial crimes are also becoming complex in nature that requires expert professionals to tackle.
BSEC officials said there were numerous suspected financial reports-related wrongdoings by the listed companies, which the commission could not investigate due to shortage of manpower.
The officials said the BSEC identified some cases where the companies deliberately declared wrong quarterly financial statements to manipulate share prices.
The commission only deals with the crimes that are more visible and easy to investigate, they said.
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