BRAC EPL clarifies share sale from ‘closed BO account’

BRAC EPL Stock Brokerage has provided clarity on its position to the stock market regulator as the brokerage firm has been accused of selling shares from a closed BO account held by an international brokerage house violating securities rules.

“Shares were sold from the active BO account of Financial Brokerage Group, not from the closed account,” said the BRAC EPL in a clarification.

On Wednesday, shares of three companies—Grameenphone, Square Pharma, and British American Tobacco Bangladesh Company (BATBC)—worth Tk 12.56 crore were sold from a closed BO account at BRAC EPL Stock Brokerage, a subsidiary of BRAC Bank.

On the same day, the Bangladesh Securities and Exchange Commission of Bangladesh (BSEC) instructed the local brokerage firm to explain the share sale.

The BO account was opened with the BRAC EPL on December 4, 2016, by the Financial Brokerage Group, said the brokerage firm that maintains a lion’s share of the foreign portfolio.

It executes trades on behalf of its foreign clients, and the clients have their BO accounts opened with a custodian bank.

However, the international brokerage firm does not have any BO IDs of its own. Since there is a requirement in the BREC EPL system that all trading accounts should be backed by a BO account, the account that was used, is an account of a foreign investor who is also a client of Financial Brokerage Group.

As the client registration system does not allow the inclusion of multiple BO, BRAC EPL provided the above BO information of one of the clients of the financial brokerage for trading purposes only. The mentioned BO ID was active when we opened the account in 2016.

In the letter, BRAC EPL Chief Executive Officer Ahsanur Rahman said, “We would like to reconfirm to you that yesterday’s sale was settled from the active BO of the client.”

The international broker firm collects orders from their clients and sends us the same through email or Bloomberg collectively. Upon completion of any trade in the above-mentioned trading account, they send us details of BO accounts along with details of the allocation of share quantity and price, and accordingly, the share/money is credited to the respective accounts.

Once such a trade is completed, we inform all regulators, BSEC, and stock exchanges by sending all foreign executions in a specific report format, both in hard copy and email, every week.