Express (August 09, 2011)
A number of national dailies published reports about "illegal trading of shares under placement" on the same day as the lead news. It has been termed as the kerb or underground market. Of course, any market which does not run under settled rules can be considered as a kerb or illegal market. It has, however, been not clear whether it is a co-incidental or an organised move to publish the same report the same day while giving an almost similar treatment in a number of dailies.
Nobody can, indeed, support any illegal trading. What is of concern here is that there is the undertone of any total condemnation of placement of shares. From the report under mention here, it appears that there has been 'Tsunami' of placement of shares. In the share market, this type of individual scam market will always appear from time to time. The Mumbai share market had Harshad Mehta for shares rigging and Ketan Parekit for massacre in the unit trust. New York witnessed the disastrous activities of Madoff. We have Nabiullah Nabi.
Our share market previously experienced two scams. But unfortunately the first scam in 1996 was the result of intentional or unintentional wrongdoing of multiple organisations like stock exchange, Securities and Exchange Commission (SEC), banks and finally the shenanigans who were operating in the market. But this time the gargantuan trading of shares, procured or supposed to be procured, seems to be the brain work of a single man -- Nabiullah Nabi. But who are his elements? They reportedly include Members of Parliament, renowned politicians, some members of both the stoke exchanges, media personalities and last but not the least, the high-ranking bureaucrats. Individually, none of them invested less than a few million takas.
Can we not call Nabiullah Nabi's function as a tour de force? Otherwise, how he could attract a galaxy of stars from the society? Hardly any small investor could approach him because he cannot "afford" it. The SEC should enquire into the matter. But we would like to humbly remind all concerned that the bush must not be lost in search of trees.
Placement of shares is a system which is otherwise universally accepted in the stock market. Institutional investors are the life-blood of a share market. They maintain portfolios of individuals investors, provide margin loans and they need shares to run their our functions. In our country, we have a large number of educated unemployed youths and many of them give time and move around the stock exchanges, merchant banks on broker's houses.
Quite a long time ago, this writer was one day talking with a US citizen at the Dhaka Stock Exchange (DSE).When this scribe requested the US citizen to narrate the investment scenario of a share market, he replied that he did not know nor bothered to know about any scenario. His portfolio manager handles everything and he receives the financial statement.
There is another side of the coin. Sometimes, the issuers themselves became very interested for placement of shares. By placement of shares, they procure a position of the fund and peacefully move ahead when a company floats shares to the public, hitherto known as initial public offering (IPO); his accountability rises from the day one of the offer. This does not mean that this writer is merely advocating for placement. IPO is the means through which the real small investors can own shares. What this scribe is suggesting here, is the need for synchronisation of twin actions -- placement of shares and I.P.O. In this connection, a very burning topic needs to be recalled. It is argued -- and that is also a fact -- that the primary market has been very strong and any issue worth its name has been oversubscribed many times in the Bangladesh market. The problem is that the member of issues is not at all satisfactory.
Another apparent contradiction is that the private sector is still very shy of going public, though they raise hiccups for shares of state-owned enterprises. Banks and insurance companies have been listed as they are required to do so, under conditions imposed at the time of granting licences by the central bank/Chief Controller of Insurance, as the case was earlier; presently, the office of the Chief Controller of Insurance has been replaced by a new insurance regulatory authority.
Anyway, there is widespread resentment over the placement of shares. Lack of transparency in the deal, i.e. activities involving placement of shares, has added flame to the fire. As noted before, the importance of placement system can not be underestimated. Simultaneously, common people's concern has to be addressed.
In this situation, the SEC has a very important role to play. It has to be pragmatic, not populist. We are certain that the elaborate report on placement will generate much heat in the political arena. Our political culture lacks any consensus between the government and the opposition about any issue of national importance. That is why during the recent disaster of share market the main opposition party, Bangladesh Nationalist Party (BNP), overblew the issues. A very senior member of this party made a preposterous comment like giving assurances about paying compensation to the affected investors if they are voted to power. This is neither practical nor-feasible.
The present high-ups of the SEC had to join at a very crucial moment. The image of the SEC was at its lowest ebb. People in general had held it responsible for the share market disaster, to a great extent. It was expected that the new authorities of SEC would make a jump-start with a fresh outlook. But now it appears that the new set-up is more inclined to follow the footsteps of their predecessors and, thus, are becoming dependent on the advice and guidance of outsiders.
The SEC authorities do need to keep in mind that the activities of their predecessors have placed them in the quick-sand of failure.
The SEC is primarily a regulator and secondarily a facilitator. Keeping this in view, the issues about placement of shares and also book building method should be handled.
While listening to the views of other players in the capital market, the regulator has also to be careful about the activities of the vested interest groups. Everyone is likely to promote his own interest. It is only the SEC which can and should rise above board and take decisions keeping the country's interest into utmost consideration. The SEC has to do justice to the institutional investors as well as the general small investors.
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