The Bangladesh Securities and Exchange Commission is laying auto-flagging system at Central Depository Bangladesh Limited to block sales of shares by sponsors/directors of the listed companies without any disclosure.
The sponsors/directors were often found selling shares without any declaration to public, and without prior regulatory approval as they fell short of mandatory minimum shareholding of 2 per cent individually and 30 per cent jointly.
The regulator has recently formed a committee headed by its executive director Farhad Ahmed to work with the issue. Chief technology officers of CDBL and stock exchanges are also on the committee.
BSEC made the decision after Dhaka Stock Exchange urged the commission to bar secret share sales by sponsors/directors of the listed companies.
According to the BSEC notification issued on November 22, 2011, all sponsors/promoters and directors of a company listed with any stock exchange must all time jointly hold minimum 30 per cent shares of the paid-up capital of the company.
In case of non-holding of the amount of shares, the sponsors/promoters and directors would not be able to sell or transfer any shares until acquisition of the specified amount of shares.
As per the BSEC new scheme, the company itself would block its sponsors/directors’ beneficiary owners’ accounts through a module connected with CDBL. The company would not able to open the block once it is sealed.
DSE and Chittagong Stock Exchange would have the control over opening the block through a module connected with the CDBL trading system.
The bourses would open the block for a certain period the sponsor/director declares to sell shares and after that period the bourses would block it again.
The exchanges will not let the sponsors/directors sell shares if they fall short of holding 2 per cent shares individually and 30 per cent jointly.
Analysing the latest shareholding position of the listed companies, it was found that the sponsors/directors of more new companies fell short of the mandatory shareholding, meaning that the sponsors/directors of those companies sold shares secretly, breaching securities rules.
BSEC could hardly stop secret sales and front-running with their enforcement means, soruces said.
They said there was a sense of angst that BSEC had not done enough to minimise irregularities and their was no respite in sight.
The sales stir up trouble at the market as investors lose confidence over the companies’ business performance.
The DSE directors raised voice against the erring sponsors/directors of the listed companies.
DSE officials claimed that the companies’ directors with the connivance of the companies’ management sold shares through their own brokerage houses.
It was found that the firms and the directors along with other connected entities executed synchronised and structured trades that resulted in a turbulent situation in the market.
The practice that continues spreading indicates complete laxity and dereliction of duty by the companies as well as the regulators, sources said.
According to the DSE December review, sponsors/directors of 46 companies did not jointly hold the required shares.
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