FE Report (January 23, 2011)
On Thursday, capital market regulator Securities and Exchange Commission (SEC) suspended the trading of Dhaka Bank Securities, NCC Bank Securities, Al Arafa Bank Securities, PFI Securities, IIDFC Securities, Alliance Securities and Management limited.
The six brokerage houses were prohibited from trading for their alleged involvement in market manipulation by huge sales orders on Thursday. The investors of the six brokerage houses were advised to open link account in other brokerage houses to continue trading.
On that day, the main index of Dhaka Stock Exchange, DGEN, plunged by 599 points within 6 minutes of the start of trading mainly due to the heavy sales pressure from the majority of the investors.
Criticising the SEC decision, Yaweer Sayeed, a market analyst, said that the reason cited by SEC for suspension of the brokerage houses' trading is not acceptable. Every investor has the right to sell shares on the basis of the market situation. He said, it is also very hard to determine what an `unusually low price' is. That is why on basis of this any punishing decision is very harsh.
"Investors will be affected by the SEC decision as opening link accounts in other brokerage houses is not easy. Here confidence is an issue for the investors concerned", said Mr. Sayeed, who also acts as a fund manager.
A leading stock broker, on condition of anonymity, told the FE that the allegation raised against the brokerage houses is not clear yet. It seems trading suspension decision is an 'eyewash', he added.
He said investors of the six brokerage houses would definitely hurt by the suspension decision.
Who will take responsibility of the margin loan of the investors of the six brokerage houses? He posed the question. So opening of link accounts with other brokerage houses will be a complex task, he observed.
"It is very usual to take punitive measures if anyone is involved in market manipulation. But as a regulatory body, SEC needs to detect and determine that manipulation first," the broker said.
On trading suspension of the brokerage houses, DSE president Shakil Rizvi said if innocent people are penalised, then it is very unfortunate. If anyone is involved in creating panic in the market, they should be punished.
"Things are not like that the market will collapse in one day. Institutions have the responsibility to create awareness of their investors. Maybe the institution has failed in this regard, said Rizvi adding that if investors are hurt by any decision, DSE authorities will look into the matter. DSE will talk to SEC to find out a solution for the investors."
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