Auditor appointed to track down DSE’s failure to meet objectives

The Dhaka Stock Exchange (DSE) has appointed an auditor to find out reasons behind its failure to achieve all 12 objectives laid out in the demutualisation scheme.

It recently picked up ACNABIN Chartered Accountants to do so as per the instruction of Bangladesh Securities and Exchange Commission.

DSE Chief Operating Officer M Saifur Rahman Mazumdar told The Business Post that the auditor will examine the accomplishment of the decoupling of ownership and trading rights in line with the spirit of the Exchanges Demutualization Act, 2013.

The auditor will submit its report to the DSE board within 45 working days.

BSEC officials said that the DSE failed to comply with the objectives set out by the demutualisation scheme over the last eight years.

Last year, the regulator instructed the prime bourse to appoint an auditor to look for reasons behind its failure to meet the objectives. But the DSE took six months to appoint an auditor. 

The auditor will examine whether the ongoing functions of DSE are in compliance with the code of conduct, code of ethics, and other issues as per the provisions of the Dhaka Stock Exchange (Board and Administration) Regulations, 2013 and the Exchanges Demutualisation Act, 2013, said the BSEC.

Before finalising the report, the auditor needs to conduct a tri-party meeting with the BSEC and DSE to resolve audit issues and their findings for the finalizing review report, it said.

According to the Stock Exchange Demutualisation Act 2013, 40 per cent of the DSE’s shares were credited to its members’ accounts, while the remaining 60 per cent were kept in a blocked account.

After selling 25 per cent of its shares from the blocked account to strategic investors, the bourse would float the remaining 35 per cent through an initial public offering (IPO).

After the stock market crashed in 2010, stakeholders demanded that the government ensure monitoring to stop manipulation and bring transparency to the stock market, to restore investors’ confidence. Following the demand, the Act was passed in parliament in 2013.

With the view to making it a more professional and profitable organization, the bourse went through demutualisation in 2013, a process that separated the bourse’s ownership from its management.

The Chinese bid reportedly also contained a technical package for more than $37 million of additional investment to overhaul the technology platform of the DSE. The SZSE alone has more than 1,000 people in its technology division.

The BSEC has expressed its utter dissatisfaction with the DSE’s failure to achieve all 12 objectives laid out in the demutualisation scheme in the last eight years.

In light of this, it intends to appoint an independent auditor in the DSE to investigate the causes of the failure by the 2020 deadline.

“Twelve objectives were supposed to be achieved. But none was attained,” said the BSEC in an evaluation report.

The commercial objectives are: achieving a sustainable average daily turnover of Tk 2,500 crore, ensuring steady domestic and offshore institutional investments of at least three-fourths of the total investments in the market, attracting more foreign investments in order to maintain a steady level of at least 30 per cent of total market capitalisation, and increasing the total number of listed securities, the depth, and liquidity of the bond market, including bringing government securities under the trading net and increasing the breadth of the market by listing new products, such as index futures, ETFs, Sukkuk, and derivatives.