2021 sees largest drop in BO accounts

The number of Beneficiary Owners (BO) accounts of the stock declined more than 5 per cent or 5 lakh in 2021—the largest drop in years—due mainly to the securities regulator’s curbing scope of subscription for IPO shares.

The number of active BO accounts stood at 20.34 lakh in 2021, a decrease of 5.17 per cent from 25.5 lakh recorded in the previous year, according to the latest data from Central Depository Bangladesh Limited (CDBL). The figure was highest in 2017 when it was 27.22 lakh.

When someone wants to invest and trade in the stock exchanges, he or she needs to open a BO account with any brokerage firms or merchant banks. BO account holders can keep their shares in their BO accounts just as bank account holders save money in bank accounts. All the shares issued in the stock exchange are preserved in electronic form and investors own BO accounts that can keep the shares in their accounts.

The capital market mostly wore a shining look throughout the outgoing year. But the back-to-back waves of Covid-19 and strict regulatory conditions made many investors inactive in the market, according to stockbrokers.

In September 2021, the Bangladesh Securities and Exchange Commission fixed Tk 10,000 as the maximum and minimum amount of IPO subscriptions for general investors. An investor needs to have shares worth Tk 20,000 and Tk 10,000 deposit while applying for an IPO as per the new rules.

The minimum investment worth Tk 20,000 in the secondary stock market is mandatory for an investor to be eligible for subscribing IPO shares. Previously, a general investor was allowed to subscribe IPO shares worth any amount between Tk 10,000 and Tk 50,000.

On December 31, 2020, the BSEC had framed rules on IPO share allotments among the investors on pro rata basis instead of the IPO lottery system to ensure that every applicant gets shares in proportion to their subscription value.

“Many newcomers opened BO accounts with their small capital but left the market later when the market started to fall amid the pandemic,” said Abu Ahmad, a capital market analyst.

According to sources, the recent sanction imposed by the USA on several government officials in Bangladesh made the non-resident Bangladeshi discouraged in maintaining BO accounts.

As a result, the accounts held by the NRBs declined from 1.56 lakh to 86,000 in 2021, the data shows.

“NRBs’ departure from the capital market is not a rare scenario. But the recent US’s measure might have an adverse impact on them.”