Bonus share, directors’ shareholding rules tightened

BSEC decides to suspend or revoke licence of Alliance Securities

Staff Correspondent | Published: 00:00, May 22,2019

 
 

Bangladesh Securities and Exchange Commission on Tuesday tightened issuance of bonus shares by companies saying that no listed company can declare stock dividend except the reasons for business expansion, modernisation, reform and development of its quality.
The company must declare reasons for declaration of bonus shares and mention sectors to use preserved funds against the stock dividends in its price sensitive information.
The decision came at a commission meeting presided over by its chairman M Khairul Hossain, said a press release.
The commission will issue notification in this regard soon, it said.
BSEC at the meeting also imposed a number of restrictions on the companies’ directors who are non-compliant with the notification regarding holding of mandatory 2 per cent shares individually and 30 per cent jointly.
The regulator will replace its notification issued on November 22, 2011 with a new notification for ensuring more transparency and accountability in the market, the press release said.
The new notification will have a provision that the directors excluding independent directors who are non-compliant with 30 per cent joint shareholding rules cannot sell, transfer or mortgage shares. But, if a director dies, his/her shares can be transferred.
The companies non-compliant with 30 per cent shareholding rules cannot raise capital through right shares, repeat public offer, bonus shares, amalgamation or any other capital raising means.
A company or institution can nominate a person for directorship at a listed company for holding minimum 2 per cent shares of the listed company.
If any director fails to hold 2 per cent shares, it will result in casual vacancy at the board. The position must be filled up within 30 working days with a shareholder who holds 2 per cent shares of the company.
The two stock exchanges will create separate category at their trading board for the companies whose directors fail to maintain 30 per cent shares jointly.
BSEC at the meeting decided to suspend or revoke licence of a Dhaka Stock Exchange brokerage house, Alliance Securities and Management Limited, for conducting gross financial irregularities.
The capital market regulator made the decision based on its inspection which revealed that the entity violated condition number 2 of the stock-dealer, stockbroker and authorities dealer regulations, according to a BSEC press release issued after the commission meeting.
In violation of rule 8A (1) of Securities and Exchange Rules, 1987, Alliance Security misappropriated Tk 12.97 crore from the house’s consolidated customers account and shifted the money to the entity’s dealer account and used it for its directors’ loan adjustment.
The BSEC investigation team also faced non-cooperation from the DSE member broker as Alliance Securities refrained from providing customers’ consolidated account detail, violating section 18 of Securities and Exchange Ordinance, 1969 as well as stock-broker, stock-dealer and authorised dealer regulations.
The brokerage house also breached securities rules by providing fund withdrawal facility to its directors and their family members despite inadequate balance.
Alliance also refrained from adjusting its directors and their relatives’ loans which were issued in violation of securities rules.
Besides, the brokerage house continued taking cash fund above Tk 5 lakh from its clients in violation of Rules 8(1)(cc)(I) Securities and Exchange Rules, 1987.

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