During the financial year 2000-2001 many development took place in the Bangladesh capital market. Various legal and institutional reforms were introduced by the Government in the FY 2001 to restore the confidence of investors in the capital market which can be seen from the prevailing stable and user friendly environment in the capital market.
The substantial increase of average turnover, all share price index, and market capitalization during FY 2000-2001 in comparison to FY 1999-2000 indicates growth, stability, and strength of the capital market. During the FY 2000-2001 till 30th June 2001 capital amounting to Tk. 712.00 million was raised by 11 (eleven) issuer companies.
To keep trend of reforms in the capital market and ensure good corporate governance and accountability of the listed companies adoption and application of the International Accounting Standards and International Standards of Auditing in the financial statements of the listed companies have been made compulsory. The listed companies have been grouped into categories on the basis of holding Annual General Meeting, declaration of dividends and continuous operation of business. As a result demand for securities of companies having good fundamentals has increased and it is expected that the situation will improve further. The rules have been relaxed to allow the commercial banks to operate as merchant banks, as a result, institutional investment will be increased significantly. To reduce the trend of investment and finance for industrialization using fund from commercial banks, steps have been taken to frame rules for issuance of bond in the capital market under the assistance of the World Bank.
Measures taken by the Government during the FY 2000-2001 through budgetary incentives includes tax rebate at the rate of 10% for the listed companies for declaring dividend @ 25% or more, exemption limit of dividend income raised from Tk. 30,000/- to Tk. 40,000/-, tax rebate for investment in the secondary market, investment allowance up to Tk. 2,25,000/- allowed in place of Tk. 2,00,000/- if the investment is made in the initial public offering (IPO) of a publicly listed company, abolishment of the provision of tax deduction at source on bonus shares, and reduction of turst deed registration fee concerning bonds, debenture and mutual funds by fixing at Tk. 2500/- instead of 2.5% on par value which has yielded fruitful and effective results in the development of capital market.
On the other hand, reforms under capital market development loan of the Asian Development Bank, such as reforming the Commission with full time members by abolishing part time memberships, delegation of rules making power without taking Government approval to the Commission upon taking of public opinion, power to take stern action against violators of securities laws, encouraging investment in the capital market through amendment of Trust Act and Insurance Act., ensuring equal participation of the investors representatives in the board of the exchanges, separation of administration from policy makers council in both the exchanges, approval of Mutual Fund in the private sector, formation of Central Depository Company, all of which have strengthened the Commission and market enviornment in acceleration of the capital market development activities.
In addition, other measures have also been taken during the FY 2000-2001, such as separation of the settlement system in the stock exchanges based on status of holding Annual General Meeting (AGM) and dividend payment by the listed companies, imposition of penalty in the event of non-payment of declared dividends by listed companies, suspension/cancellation of licenses, penalty, and if necessary instituting criminal cases against listed companies/broker/dealer/merchant banks/auditors and related persons for violation of securities laws. Pragmatic measure has been taken for application of International Accounting Standards as adopted by ICAB to improve the financial reporting of listed companies. To this end, the SEC has amended the Securities and Exchange Rules,1987 requiring financial statements of listed companies to be audited within 120 days after the end of the accounting year and to submit the same to SEC and stock exchanges within 14 days. Rules have been made requiring the financial statements to be audited by partnership firm of at least two Chartered Accountants having not less than 7 years of experience. New rule have also been made to ensure that financial reports transmit true and fair picture of the companiesí state of affairs in compliance with internationally accepted accounting & auditing standards. The new provision also empowers the SEC to order for special audit at the cost of the companies involved in unfair practices. This will ensure greater accountability of the listed companies. Proposal for shifting of functions of monitoring listed companies to the Securities and Exchange Commission from the Registrar of Joint Stock Companies and Firms.
of shares of companies in the gas, power and communication sectors
under government ownership in the capital market will increase supply of
shares having good fundamentals. To this end, SEC has
suggested to the Government to offload their holdings in the multinational
and other companies in the capital market.
The surveillance and monitoring activities have been strengthened in the SEC and stock exchanges. The Commission has also taken punitive actions for violating securities laws and initiated legal actions against some violators.
Bangladesh SEC has been maintaining close and cordial relationship with the securities market regulatory bodies of other countries. In 2000-2001 I have participated in the Annual Conference of International Organization of Securities Commission (IOSCO). The Commission also sent its officials to the seminar/training programs abroad. We express our gratitude to IOSCO, in particular to the UNDP and Asian Development Bank, for extending financial support for this purpose.
I also take the opportunity to express our gratitude to the Ministry of Finance for giving guidance and supporting SECís efforts in the implementation of reform and development policy measures. I gratefully acknowledge the cooperation of Bangladesh Bank, stock exchanges, Investment Corporation of Bangladesh, all market intermediaries and Bangladesh Association of Publicly Listed Companies.
I also convey my appreciation to members, officers and staff of the Commission for their sincere commitment, support and high standard of professionalism in carrying out the difficult tasks of the Commission. I thank them all.
have firm belief and confidence that the Securities and Exchange Commission
will continue to implement the necessary reforms to ensure fair practices
and to have a sound and disciplined framework for the smooth operation
of the capital market where the investorsí interest will be fully protected.