Securities of bankrupt entities cannot be distributed

The Bangladesh Securities and Exchange Commission (BSEC) has included a bankruptcy remoteness asset provision in the draft of the Bangladesh Securities and Exchange Act 2022 to determine which securities or shares will remain excluded from distribution or confiscation if a person or company declares bankruptcy.

Under the provision, trust money, securities, or guarantees given to the central counterparty and depository for clearing and settlement purposes cannot be confiscated or distributed by a bankrupt entity, according to the draft rules of the act recently published by the Financial Institutions Division of the Ministry of Finance.

The rules also state that securities deposited in the accounts of a customer with the depository cannot be distributed or confiscated as well. The rule applies to securities deposited by customers to stock brokers, stock dealers, portfolio managers, depository participants, security custodians too.

The draft law has been jointly prepared by the stock market regulator and the Financial Institutions Division by combining the Securities and Exchange Ordinance 1969 and the Bangladesh Securities and Exchange Commission Act 1993.

The proposed draft further expands the qualification and experience requirements of the BSEC chairman and commissioners.

According to the draft, at least 20 years of work experience with a minimum bachelor’s degree in commerce, business administration, law, or economics and any other subject required by the BSEC at the discretion of the government will be considered necessary qualifications for the appointment of the chairman and commissioner.

Meanwhile, the existing law does not mention the rank of the chairman and commissioners. However, in the draft, the BSEC chairman is proposed to be promoted to senior secretary, and commissioners to secretary.

According to the draft law, in special cases of failure to maintain good corporate governance, the BSEC can reconstitute the board of a listed company without any hearing.

The draft further states that the stock market regulator has planned to conduct intelligence activities with the aim of stopping market manipulation. A qualified auditor selected by the Financial Reporting Council will carry out the valuation.

According to officials of the BSEC, the new strategy is part of a broader effort to restore investors’ confidence in the stock market, which has been plagued by allegations of corruption and misconduct in recent years.

According to the draft rules, the BSEC or the stock exchange would conduct surveillance activities for the supervision and monitoring of the securities market.

It also equips the BSEC with the authority to establish one or more special tribunals to serve the purposes of the act.

The sessions court or its subordinate court may transfer ongoing cases or proceedings to the special tribunal within 120 days, either on their own initiative or following an appeal from the commission.

The special tribunal will conduct judicial proceedings from the stage at which it receives the case unless it decides otherwise.

If a party is aggrieved by the judgement of the special tribunal, the party may appeal to the High Court within 60 days of the judgement.

The draft law also prohibits the use of the internet, social media, or any other media to use undisclosed price-sensitive information, influencing the issue price by giving unreasonable or misleading bids during initial public offering (IPO) bidding.

It states that no person shall publish in the press any misleading, false, or incomplete financial analysis or news of any security that may affect the price of that security or the securities market.

The draft also powers the stock market regulator with the authority to assess and regulate mergers, acquisitions, takeovers, affiliations, and reconstructions of listed companies.

The BSEC may also enter into joint activities, cooperation, and information exchange agreements with national and international agencies.

The Securities and Exchange Commission was established on June 08, 1993 as the regulator of the country’s capital market through enactment of the Securities and Exchange Commission Act-1993.

Through an amendment to the Securities and Exchange Commission Act-1993 on December 10, 2012, the commission was renamed the Bangladesh Securities and Exchange Commission.