The securities regulator Bangladesh Securities and Exchange Commission (BSEC) has formed an inquiry committee to investigate several alleged irregularities in Southeast Bank Limited, including insider trading, and issues like actual shareholding of its board members and their transections.
BSEC Additional Director Md Faruque Hossain will lead the three-member committee, which has been given 60 days to submit the probe report, as confirmed to The Business Post by the regulator’s Executive Director and spokesperson Mohammad Rezaul Karim.
The committee formed Sunday last will investigate the directors’ shareholding, loans, investments, and transactions, and will look into possible insider trading, price manipulation, and securities violations, if any, several BSEC officials familiar with the matter said.
Earlier, the stock market regulator last year had formed a three-member body to look into insider trading allegations against Mamun Azim, the son of Southeast Bank Director Azim Uddin Ahmed.
According to the regulator, the committee was formed as per the directive of the High Court.
Insider trading is defined as the use of privileged access to price-sensitive information to gain through the buy-sell of company shares. If the allegations are found true, they will be accused of violating insider trading and other securities laws.
The bank’s five founder directors that time had raised allegations of corruption, irregularities, and money laundering against incumbent Chairman Alamgir Kabir.
They also sent a letter to Bangladesh Bank Governor Fazle Kabir in 2021, saying the bank’s deposits were in danger because of the chairman’s corruption, fraudulence, and money laundering.
The question raising directors were MA Kashem, former chairman of the bank; Azim Uddin Ahmed; Duluma Ahmed, current vice chairman of the bank; Rehana Rahman; and Jusna Ara Kashem.
They had urged the central bank to investigate the allegations against Kabir, his cronies, and the syndicate.
In their letter, the directors said Kabir had been at the bank’s helm for the last 17 years, giving rise to dissatisfaction among the founders, directors, employees, and shareholders.
It noted that other directors and shareholders were ‘very annoyed’ over the monopoly power of Chairman Kabir, as his corruption and irregularities put the depositors’ money at risk.
The directors accused Kabir of ‘lending to his relatives; waiving interest on current loans without following rules and regulations’.
The directors also claimed that Kabir had given loans to various ‘ineligible companies’, bypassing all other directors, and that he took ‘special benefits’ from the clients for issuing the loans.
According to the letter, Kabir unilaterally granted considerable loans to Bay Leasing and Investment Ltd, a non-banking financial institution controlled by his family. Bay Leasing’s balance sheet did not show more than Tk 400 crore in loans it had taken.
The letter also said that the bank had illegally given interest waiver facilities of Tk 54 crore to Lub-Rrref Bangladesh Limited, owned by a close relative of Kabir.
Southeast Bank showed its interest income at Tk 281 crore in the bank’s annual report for 2020, but the lender’s actual interest income was Tk 781.45 crore. There were irregularities worth Tk 500 crore, the letter noted.
Meanwhile, a Bangladesh Bank inspection team found that Southeast Bank has given BLI Capital Tk 200 crore in loans, violating rules.
The loan was given without the prior approval of the central bank and its board of directors.
Any related party loan must be covered by 100 per cent security as per the bank company act, but the private commercial bank lent the money without keeping security.
The inspection team also found that the listed private bank held shares of National Life Insurance Company, a related company of the bank’s chairman, Alamgir Kabir, in violation of rules. Kabir has been leading the bank for the last 17 years.
Bay Leasing and Investment holds 99.99 per cent of BLI Capital shares, according to the findings. The BB also found that Alamgir’s son, Raiyan Kabir, holds shares in Bay Leasing.
Meanwhile, the bank held 1.4 crore Bay Leasing shares till July 2021, according to the report.
Southeast Bank has bought 40.99 lakh Asia Insurance shares, violating rules.
Alamgir holds 13.99 lakh Asia Insurance shares, while Raiyan, also the bank’s director, owns 55,125.
Southeast Bank paid 10 per cent dividends, including a 6 per cent cash dividend, for the year that ended on December 31, 2022.
The bank raked in an operating profit of Tk 1,043 crore in 2022. The lender's total deposits amounted to Tk 37,114 crore and its total assets reached Tk 49,309 crore as on December 31, 2022.
Southeast Bank's share price stood at Tk13.30 each on the Dhaka bourse on Wednesday.
