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Publicly traded edible oil producer Emerald Oil Industries Ltd did not reveal any financial reports in the last six years although the company recently announced taking it to the global market by opening a branch office in Japan.
Another similar example is C&A Textiles Limited which after five years declared last August to resume its production again after its takeover by Alif Group.
But it too did not provide its investors with financial updates for a long time.
Even, the company has not been holding any annual general meetings (AGMs) since 2017.
These two incidents do not reflect the entire scenario of anomalies of the listed firms as the failure of publication of financial reports has become a norms for many aberrant firms.
Though all publicly traded companies are legally bound to publish their financial statements in due course, according to the securities laws, many of them are defying regulatory guidelines for a long time.
But they are still enduring on the trading boards of the stock exchanges, thanks to poor regulatory enforcements that are also prompting their incompliances.
But these irregularities are increasingly pushing the general investors out of the frying pan into the fire because many of them put their investments in these firms without knowing their actual financial states, finally eating up their funds.
This tendency also ramps up speculations and gambling in the capital market that in the long run hurts the general investors the most.
According to the Dhaka Stock Exchange (DSE) data, as many as 23 listed firms are not revealing their financial reports properly, which is a clear violation of the securities laws.
As per the listing rules of the stock regulator Bangladesh Securities and Exchange Commission (BSEC), a listed firm must submit its quarterly financial statements to BSEC within one month after the end of the quarter (except for Q1).
The company is also legally obliged to publish the financial reports on its website immediately after holding its annual general meeting (AGM).
To this end, the stock exchange concerned has also the right to look into any of its company’s financials if it finds any unusual fluctuations in the firm’s financial parameters from quarter to quarter.
And in case of any delayed submission of the quarterly reports, the stock exchange can fine the default company Tk 5,000 per day, as per the listing rule.
According to the DSE data, Jute Spinners Limited used to publish its quarterly reports once or twice a year though all companies are obliged to publish all four quarterly reports in a year.
And the grimmest thing is that it held its last AGM in 2016.
Even the information about the company’s dividend pay-outs was not available on the website of the DSE though it got listed in 1984.
Although there has been no information about the firm’s business and financial developments for a long time, investors were still now paying much attention to the company’s shares, helping jump its stock prices.
The shares of Jute Spinners Limited were traded at Tk 205 per share on Thursday.
But its stock price reached its two-year high of Tk 270 in the previous week on the DSE trading floor.
The story is the same for C&A Textiles with its shares reaching Tk 11 per share in September last which was just Tk 1.9 two years ago.
These incidents show that gamblers might play roles to stimulate the stock prices of these non-compliant companies.
Sheikh Shamsuddin Ahmed, a commissioner at BSEC said securities laws have provisions for punishment for the failure of companies’ financial reports submissions, but the punishment cannot ensure the full implementation of laws.
“Due to the Covid-19 pandemic, the timeframe for the publication of companies’ quarterly and other financial reports was extended to three months which would continue until December this year. That’s why some companies are delaying to release of their financial reports,” he added.
He, however, commented that the BSEC was working on it and expressed his hope that all the companies would be sincere about the deadline for publishing their financial reports.
Mohammad Rezaul Karim, executive director and spokesperson for the BSEC told The Business Post that the number of non-compliant companies in the capital market is now much less than before.
“Most of the companies which are not publishing their financials due course remain out of production for a long time,” he added.
“The BSEC reconstituted the boards of many companies to bring them back into operations and ensure their compliance. So, it is expected that the number of the non-compliant firms would go down in the coming years,” Rezaul Karim continued.
“The companies which have been inoperative for a long time cannot be transformed into good ones overnight. They must be given time for their progress.”
According to the DSE data, Savar Refractories Limited, and Delta Spinners Limited are two firms that have not held any annual general meetings since 2018.
Bangladesh Industrial Finance Company, People’s Leasing & Financial Services, and Imam Button Industries also entered into the non-compliant list as they have had no annual general meetings since 2019.
Moreover, Beach hatchery, Delta life insurance, Ring Shine textiles, and Shurwid industries remained out of annual general meetings after 2019.
Apart from them, Bangladesh Welding Electrodes, Uttara Finance and Investments, Fareast Finance & Investment, Familytex (BD) Limited, Nurani Dyeing & Sweater, Miracle Industries, Western Marine Shipyard, and Progressive Life Insurance did not hold AGMs after 2020.
Commenting on the issue, capital market analyst Professor Abu Ahmed told The Business Post that the rise in the share prices of these disobedient companies, which also have been closed for a long time, remain unabated in the capital market.
“These companies don’t respect the existing securities rules and regulations. The more time is given to them, the more risks would be created for investors,” he commented.
Shakil Rizvi, a Dhaka Stock Exchange (DSE) director, said every listed company must pay dividends and publish financial reports in due course so that investors can take proper investment decisions to book profit from the capital market.
