SEC Annual Report,1998-99 

I am pleased to publish the Annual Report of the Securities and Exchange Commission (SEC) for the Financial Year 1998-99. This is the sixth Annual Report since the establishment of the commission in June 1993. The activities and accomplishments made during the period under review reflect commission's hard work, commitment and continued efforts for the developement of capital market. I have highlighted some of the Commission's achievment below...

Enhancing Investors' Protection:

During the year Commission strengthened its surveillance activitiesto ensure fair and transparenttrade practices in the market players that no misconduct relating to sale or buy of securities will be tolerated. We are committed to fight against unfair and fraudulent activities to protect the investors in the securities market. Based on the complaints received, and reports on investigations and inquiry SEC took action against 3 broker/dealer  and 6 issuers. 

SEC drafted rules for Investors Protection funds to be created by the members of the stock exchanges. This fund will be used to compensate investors if their due claim has not been settled by stock brokers/dealers. 

In our web page we have created a separate page for investors information. We have Public Reference Room (PRR) where information on listed companies and laws on securities are available. On working days investors visit the Public Reference Room. A photo copy machine is provided in PRR for getting photocopy of important information at a minimal cost.

Considering the importance of investors’ awareness and education we commenced at the SEC premises the weekly Investors’ Education Program on how to invest in share market. Investors from different professions attend the program. We believe investors’ awareness and education will have a wholesome impact on the market. 

Law Enactment:

Disclosure based Public Issue Rules (PIR) were developed. The PIR, 1998 indeed was a major shift from merit based towards disclosure based regulations in line with international standards. The move towards full disclosure based regulation is a major achievement. The Bangladesh capital market has been used to merit regulation far too long. As per these rules SEC will only review prospectuses to make sure full and fair disclosure of material information is made. Also SEC will not intervene in pricing of securities of companies. In the accounting area, the rules require preparation of financial statements as per International Accounting Standards and International Standards of Auditing. 

In 1998 our two bourses Dhaka and Chittagong stock exchanges started automated on-line trading. This is a landmark development in the capital market of Bangladesh. However without having Central Depository System (CDS) in place total benefit of automated trading cannot be realized. The National Parliament passed the Depository Act, 1999 on 5th April 1999 to pave the way for establishing CDS. 

Other important laws enacted during the financial year:  Right Issue Rules, 1998 Margin Rules, 1999. Besides, important amendments were made to the existing laws. Also work is in progress to consolidate the existing laws with required amendments and adopting best practices.  

Technological Challenges:

One of the most significant areas the Commission is presently focusing is implementation of the proposed Securities and Exchange Commission Automation System (SECAS). We hope implementation of SECAS will enhance efficiency in various areas including monitoring of the market. 

Bond Market, Mutual Funds and Credit Rating Agency:

The principal instrument being traded in the secondary market is equity shares. We have few debentures and mutual funds. We are working on developing a separate debt market. A World Bank Team visited and met SEC officials in connection with the development of private sector bond market. World Bank will assist SEC in developing rules and regulations. 

All the mutual funds presently traded in the market are floated by two state owned organizations. To encourage floating mutual funds in private sector we have developed mutual fund regulations. The International Finance Corporation (IFC) assisting us to conduct an overall market study and regulatory environment for mutual fund. 

We are on the verge of setting up the first credit rating agency of the country with participation of reputed financial institutions including IFC and DCR-USA

Other Reforms:

  • Made the composition of the Council/Board of Directors of the Stock Exchanges comprise at least 50 percent non-brokers and that issuers and investors are adequately represented;
  • Eliminated Requirement for dual listing at the stock exchanges for listed securities;
  • Introduced automated trading systems at the stock exchanges and extended access nationwide;
  • The Government approved in principle the Amendments to Trust Act, 1882 to allow investment of pension and provident funds in the capital market.
  • Some of the significant reforms undertook by SEC and to be completed in the next Financial  Year are:
  • Raise the minimum capital requirement of the brokers;
  • Adopt risk base capital adequacy norms for all members/brokers of the stock exchanges;
  • Establish an Investors Protection Fund.
  • Organizational Goal: 

    We focused our efforts to strengthen the organizational structures, physical and human resources infrastructures, operational systems, management structures as well as supervisory arrangements. SEC recruited a group of young, dynamic and energetic professional staff as per its revised organogram and provided each of them on-the-job training in the regulatory organizations of emerging and developed countries. 

    International Affairs:

    At the International level, the SEC maintained close and sound relationship with securities market regulatory agencies of other countries. In 1998-99 we attended the Annual Conference and Asia Pacific Regional Committee Meeting of International Organization of Securities Commission (IOSCO). We also nominated our officers to participate in 1998 IOSCO Seminar Training Program held in Montreal, Canada. We plan to nominate officers and participate in the Meeting of Emerging Market Committee and Technical Committee of IOSCO too. 

    In conclusion I extend our sincere appreciation to all market players who have assisted the Commission in the discharge of its responsibilities. I gratefully acknowledge the cooperation of UNDP, Asian Development Bank, IOSCO, Finance Division, Ministry of Finance, Ministry of Law, Bangladesh Bank, Stock Exchanges, Investment Corporation of Bangladesh, Board of Investment and regulatory organizations of other countries for extending their assistance to SEC. 

    I would like also to convey my deep appreciation to members and officers of the Commission for their commitment, advice, support, long and hard work and smartly and professionally facing the challenges. 

    I have every confidence that the Commission will continue to perform its responsibilities with professionalism and would continue its efforts to earn the confidence of the investors.

    M. A. Syed
    30 June 1999