The Bangladesh Securities and Exchange Commission has formed a three-member committee to monitor overall activities of three brokerage firms including PFI Securities Limited, Premier Bank Securities Limited, and Shyamol Equity Management Limited.
In an official order, the stock market regulator directed the committee to investigate any irregularities and submit a report within 30 working days.
BSEC executive director and spokesperson Rezaul Karim confirmed the decision and stated that necessary action would be taken if irregularities are found in the investigation report.
The order explained that an inspection of the activities of these brokerage houses is crucial to safeguard the interests of the capital market and the investors.
The committee comprises BSEC additional director Md Ohidul Islam, assistant director Md Motiur Rahman, and assistant director Md Sagor Islam.
The investigation will examine several key areas, including the number of margin accounts operated by the brokerage houses, the number of beneficiary owners鈥� accounts with negative equity, and the total amount of negative equity.
A margin account allows investors to borrow money from a brokerage house to buy stocks or other investments. Negative equity occurs when the value of a client鈥檚 investments in their account falls below the amount they owe.
It will also look into provisions maintained by the brokerage houses, identify any shortages in these provisions, and scrutinise unauthorised transactions in margin accounts.
Provisions are funds that brokerage houses set aside to cover potential losses, such as when their clients cannot repay borrowed money or when the value of investments falls significantly. A shortage in provisions means that the brokerage house hasn鈥檛 set aside enough money to cover potential losses.
Additionally, the committee will investigate the reasons behind the growing amount of negative equity in these brokerage houses and determine who is responsible for the issue.
The investigation will explore why the firms have repeatedly failed to maintain adequate provisions against unrealised losses despite being requested to do so since 2016. It will also assess any violations of the Securities Act by these firms.
If any other relevant issues arise during the investigation, the committee has been instructed to address them in its report.
