The Dhaka Stock Exchange on Thursday decided to raise the capital requirement for buying a new brokerage licence to Tk 15.1 crore from Tk 5 crore after the incident of fund embezzlement by Crest Securities.
The board of directors of DSE made the decision for the interest of the capital market and investors, DSE officials said.
They said that the DSE decision came as the Bangladesh Securities and Exchange Commission as per regulations sought again public opinions on the draft TREC rules from June 23 to July 13 after the gazette notification of the draft rules.
As per the DSE fresh proposal, an applicant for TREC licence must have Tk 10 crore in paid-up capital and has to keep Tk 3 crore as security money with the DSE.
The applicant should also pay Tk 10 lakh as application fee and Tk 2 crore as registration fee for the licence, the DSE officials said.
The bourse would send the proposal to the BSEC next week and would request the market regulator to frame the related rules again.
The brokerage licence is called Trading Right Entitlement Certificate (TREC) which is a certificate issued by a stock exchange for execution of trading of listed securities as a broker or dealer as per securities laws.
The issue of investors’ security came to the fore after a DSE member, Crest Securities, embezzled clients’ fund last week. The owners of the brokerage house went into hiding after the embezzlement. Some other brokerage houses including Shah Mohammad Sagir were also found to be involved in fraudulent activities.
So, the DSE on Thursday backtracked on its earlier decision that supported only Tk 5 crore in capital requirement for becoming a TREC holder.
Earlier on March 25, the BSEC sought public opinions on the draft rules regarding the issuance of brokerage licence, which said that if anyone had Tk 3 crore in paid-up capital and gave Tk 2 crore as security money would be eligible for the TREC licence.
The stock exchange would get Tk 5 lakh and Tk 1 lakh as registration and application fees. The provisions in the rules had triggered criticisms among the DSE members.
The BSEC had taken suggestions from the DSE, but based on the suggestions the market regulator should not issue rules ignoring greater interest of the market and investors, market experts said.
They said that the newly emerged TREC holders must have enough financial strength and business capability to gain trust of the investors.
Besides, the draft TREC rules were not in line with the BSEC (Risk Based Capital Adequacy Rules) 2019 where a full functional stockbroker and dealer must have minimum Tk 15 crore in capital, they said.
The DSE Brokers Association of Bangladesh, a platform of shareholder-members of the DSE, protested against the weak requirements and served a legal notice on the board of directors and the management of the bourse.
There are 242 TREC holders at the DSE and some of them continue struggling in running their business.
A number of foreign firms have already expressed their interest to be DSE TREC holder. UK-based EFG Private Bank, CDF London, Black Rock and Aberdeen Asset Management, China-based CITIC CLSA Securities and USA-based Goldman Sachs Group have expressed their intention to get DSE brokerage licence.
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