Stock intermediaries under regulators’ scanner

The country’s bourses have launched the risk-based capital adequacy (RBCA) reporting software to protect investors’ interests by ensuring transparency in financial statements and compliance by market intermediaries.

Market intermediaries include stockbroker, merchant banker, asset manager, fund manager, and Credit Rating Company.

The latest move aims to avert forgery or embezzlement of investors’ stock money from their accounts. Previously, Stockbrokers Crest Securities and Banco Securities Limited had gone into hiding after embezzling the clients’ money.

Stakeholders said that Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) introduced the software to ensure compliance issues and transparency in the capital market.

DSE and CSE officials said a registered entity would submit quarterly reports electronically to the exchanges within 15 days at the end of each quarter through an online communication system approved by the stock market regulator.

Market intermediaries will be reporting on branch office activities report, investment of stock dealer, margin loan of stockbroker and net capital balance report.

Bangladesh Securities and Exchange Commission (BSEC) Commissioner Md Abdul Halim launched the software on Monday night at the DSE office. Representatives of the stock exchanges, brokerage firms, merchant banks and asset management companies attended the event.

Halim said the process to bring the capital market under 100 per cent digitisation is underway and more new services will be launched in the future.

“BSEC will provide all kinds of assistance to the institutions concerned, including the exchanges, to keep the stock investors’ investments safe and secure,” he said.

CSE Chairman Asif Ibrahim said that compliance issues play a vital role in a vibrant capital market.

The online risk-based capital adequacy reporting software developed by both the stock exchanges will play a significant role in the compliance and reporting of registered entities, that is, stockbrokers and stock dealers, and speed up stockbrokers’ work, he added.

In June 2019, BSEC published the Bangladesh Securities and Exchange Commission (Risk-Based Capital Adequacy) Rules, 2019. The commission can impose operational restrictions or conditions under the early warning system to maintain the appropriate capital adequacy level.

Each registered entity must maintain a mandatory provision of at least 10 per cent profit after tax of last year as capital reserve, and the total amount of such reserves must be accounted for in computing total capital.

Features and functions

It is simple, user-friendly and saves real-time data. The software will need updates and maintenance.

All reports will be archived and saved in server in pdf and xls formats for reference and record. Report checker and maker have separate access controls to ensure data entry and verification for increased security.

The software will notify the user about data submission seven days before each quarter.

Market intermediaries must submit a comparative statement of comprehensive income, a summary of bank loan, advance, credit facilities and other financial arrangements. They will have to file statements of total capital, capital adequacy ratio, and liquid capital computation reports.

“This software will protect the investors,” DSE Chairman Eunusur Rahman said.