4.78 lakh BO accounts closed in FY22

A total of 4.78 lakh beneficiary owner (BO) accounts were closed in the just-concluded fiscal year 2021-22 due mainly to non-payment of annual account renewal fees by the stock investors.

The number of active BO accounts stood at 20,58,071 in FY22, more than 18 per cent down from 25, 36,431 in FY21, according to the Central Depository Bangladesh Ltd (CDBL). 

The BO accounts declined significantly because of non-payment of the renewal fees by the stock investors amid sluggish stock markets, said the dealers. Analysts and stock dealers attributed investors’ worries over the country’s weak macroeconomy and the global economic outlook to the recent stock market’s downturn.

Capital losses also contributed to the exodus of investors who did not bother to renew their accounts by paying the annual fees, they said.

The market has been in the doldrums for around four months as investors grappled with various issues, including the ongoing Russia-Ukraine War, rising inflation, a record surge in the trade deficit, local currency depreciation against the US dollar, and concerns over the external debts of the country, according to them.

June is the month for clearing annual BO account renewal fees. The number of defaulted BO account holders in a given month was the highest this year.

“Many newcomers opened BO accounts with small capital but left the market later when the market started to fall as the country’s weak macroeconomic position and the global economic outlook weighed down their sentiment,” said stock market analyst Abu Ahmad.

Retail investor Sajjadur Rahman says: “The secondary market looks no good as my investment is eroding. So my BO renewal fee is not paid.”

Investors usually open new BO accounts to apply for initial public offerings (IPOs). Only a small number of BO account holders are involved in the secondary market.

On June 9, 2022, Bangladesh Securities and Exchange Commission (BSEC) decided to increase the minimum investment amount for IPO applications for general and non-residential investors.

General investors must have at least Tk 50,000 in investment in the stock market to be eligible to participate in an IPO. It is Tk 1 lakh for non-resident Bangladeshi investors, which is Tk 20,000 for both residential and non-resident Bangladeshi investors. The decision also has had a negative impact on BO accounts, according to the dealers.

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

A pro-rata basis means an applicant will be allotted shares according to a percentage of the shares applied for.

Someone willing to buy the IPO shares must be an investor in the secondary market. And an investor must have the listed companies’ shares of at least Tk 50,000 in his BO account, according to the securities regulator.

Previously, general investors had to deposit a fixed amount when they applied for IPO shares. Then a lottery is held to determine who will get the shares. Those who fail to get the shares get their money back.

As per the existing rules, a person can open only a single BO account using his/her national identity card, bank account, and phone number.

Opening a BO account with the CDBL through a depository participant is mandatory for trading shares on stock exchanges. BSEC also reduced the renewal fee to Tk 450 from Tk 500 for each BO account back in 2016.