Express (July 26, 2011)
The advisory committee of the Securities and Exchange Commission (SEC) made Monday a number of proposals for sustained growth of the country's capital market amid growing confidence of the investors.
The proposals included, among others, those relating to strengthening the capacity of the regulator in terms of the required number of manpower and their quality, putting in place appropriate monitoring guidelines, ensuring adequate flow of information including on-line facilities, fixation of a uniform tariff or rates, if necessary, on concessional terms for having access to such information, promotion of research on, and analysis of, the fundamentals of the listed companies by qualified professions after lifting of all existing restrictions on such market-supportive arrangements.
In their deliberations at the meeting of the advisory committee with the SEC chief Professor M Khairul Hossain in the chair, most members took a positive note of the latest moves and measures taken to help improve the situation in the country's stock market.
They also made strong pleas for ensuring the demutualisation of the country's stock exchanges sooner rather than later while underlining the importance of transparency and accountability of all stakeholders in the market.
One major consensus, emerging out of the deliberations by the members at the meeting, was that both the regulatory authority and the self-regulatory bodies like the stock exchanges should maintain their proper vigilance so that another bubble is not formed to burst again soon.
"The confidence of the investors must be sustained," they all emphasised.
The suggestions mooted at the meeting also included separate arrangements for transactions in shares of large capital-based listed companies and small cap ones, updating the methods of calculating stock indices on modern lines, setting proper guidelines for operations of merchant banks by avoiding as far as possible any dual authority for regulating their affairs.
It was the first meeting of the advisory committee of the SEC that was formed last March and was held at the conference soon of the SEC.
A total of 19 members, including the representatives of Bangladesh Bank, the presidents of the country's two stock exchanges, chairman of Bangladesh Association of Publicly Listed Companies (BAPLC), a very senior-level executive of Investment Corporation of Bangladesh (ICB), chiefs of two research organisations -- Centre for Policy Dialogue and Policy Research Institute -- and Editor of The Financial Express attended the meeting.
At the meeting they said the formulation of proper rules and regulations and their effective enforcement are important to supervise and monitor the activities of the stock market, including the operations of merchant banks.
But there should not be any 'over-doing' and policy flip-flops that might lead to "regulatory overkill", they noted.
The role of merchant banks in bringing new IPOs (initial public offerings) to the market and conducting other activities under the securities laws were also discussed in the meeting.
The participants felt that the supply-side problems in the market should be addressed through streamlining arrangements for allowing the floatation of more IPOs and also through expedited actions on divestment of shares of state-owned enterprises.
They stressed the need for ensuring a balance between demand and supply sides for having a stable situation in the stock market.
When asked about the meeting, Dr. Zaidi Sattar, chairman of Policy Research Institute, said it was an introductory meeting after the SEC reconstituted its advisory committee to seek market-friendly suggestions on developing the country's stock market.
"The committee discussed a 29-point agenda placed at the meeting," Mr. Sattar told the FE.
He said the issues of book building method and fixed pricing system about IPOs were prioritised at the discussion table.
The SEC will soon finalise the arrangements for such purposes and also review the listing rules of the stock exchanges, he added.
According to Salman F Rahman, the president of BAPLC, the SEC Chairman Professor M Khairul Hossain said at the meeting that the regulator has already formulated a draft to revise the book-building method and the draft will be sent to different stakeholders related to the stock market.
"The regulator is likely to finalise the draft within a week to open the window of public offerings under such method," Mr Rahman said.
Dr. Mustafizur Rahman, executive director of Centre for Policy Dialogue said the participants in the meeting noted that the proposed demutualisation of the stock exchanges should be completed as early as possible in a move to bring more transparency and accountability in the activities of exchanges.
The committee members said the index of Dhaka Stock Exchanges (DSE) should be revised so that it represents properly the real state of developments about price-movements of the listed companies, big and small ones.
In this regard, the committee members also raised questions whether three existing indices of the DSE are at all needed.
Presently, the DSE maintains three indices---benchmark DSE general index (DGEN), DSE-20 and boarder All Shares Price Index (DSI).
They also stressed the need for promoting financial researchers and analysts in the capital market professionally so that they become pro-actively encouraged to carry out such activities.
However, a top official of SEC recently said that the regulator would formulate a guideline to fix up the eligibility of financial researchers.
At the meeting, Salman F Rahman made a proposal of an alternative trading board for small cap listed companies so that the market players cannot play any foul-game with the prices of such companies that send wrong signals.
Moazzem Hossain, the editor of The Financial Express, suggested for ensuring effective and adequate flow of information about the market and the companies, so that the investors, both retail and institutional ones, can make proper decisions about investments, after being well informed about all related matters.
He noted that there are both conceptual and contextual problems with some media personnel covering the stock market. He endorsed the proposal for issuing accreditation cards for those media personnel covering the stock markets, after having adequate training on the subject.
He also made another proposal about ensuring access to information of DSE website (including on-line facilities) so that information are made available at a reasonable cost. Furthermore, he strongly pleaded for promotion of research and analysis-related activities by the qualified personnel in related matters. Both the regulator and the stock exchanges can play a strong supportive role in this connection, he added.
Furthermore, the FE Editor underlined the need for taking adequate safeguards against all kinds of insider trading.
The participants in the meeting also highlighted the importance of coordinated efforts by the regulators of money market and capital market as well as the authorities of the stock exchanges for proper functioning of the stock market.
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