The Centre for Policy Dialogue (CPD) on Sunday emphasised bringing greater transparency in the process of opening beneficiary owners (BO) accounts to prevent any malpractice.
A lack of transparency of BO accounts is a major weakness in Bangladesh's capital market, said Dr Khondaker Golam Moazzem, research director at CPD.
In a review titled "State of the Bangladesh Economy in FY2019-20", the CPD suggested that it be made mandatory for investors to submit their Tax Identification Number (TIN) certificates while opening a BO account, in addition to the existing requirements of presenting bank account statements and national identity cards.
"It may be an unpopular suggestion, but if we want to see a transparent capital market in the coming years, we should properly identify the actual beneficiaries of BO accounts.
"For building the long-term foundation of the capital market, transparency is important," said Dr Moazzem while speaking to The Business Standard.
Some insiders and securities manipulators allegedly use various proxy accounts to pursue their deceptive motives by taking a secret position in stocks and initially disclosing a rosy picture, said Abu Ahmed, an honorary professor of economics at the University of Dhaka.
He stated that these manipulators later dump those unidentified stakes, followed by a series of frustrating disclosures.
"Thus, investors are deprived of true disclosures that reflect a company's actual business scenario," he said, adding that securities regulators must have genuine information about the BO accounts where large transactions take place through a proxy.
"The regulator must attempt to crack down on illegal trading activities."
The CPD has called for public disclosure of the identity of all BO account holders registered with the Central Depository Bangladesh Ltd (CDBL).
Expressing a different opinion, Shakil Rizvi, president of the DSE Brokers' Association (DBA), said, "The call for transparency is very rational. But we should keep in mind that our economy is in the phase of capital formation, and we should focus more on channelising investments.
"A sudden crackdown on investors' identity will significantly reduce the flow of investment to the stock market," said Rizvi.
Developed markets have already reached a stable state and now they have all the systems required for transparency. But they must have overcome difficult phases with many grey areas, like ours, he said, adding, "We need investments after all."
Rizvi recommended focusing on listing good stocks and increasing investment flow to the stock exchanges.
The Bangladesh Securities and Exchange Commission, a few months ago, went through a combing operation against the BO accounts opened without due diligence in revealing account holders' identities, which led to the closure of many accounts.
According to the CDBL, since its inception, a total of 66.73 lakh BO accounts were opened in Bangladesh till June 30 last year.
However, each year, closures of many accounts resulted in the number of operable BO accounts to come down to 27.66 lakh at that time, of which only 13 lakh accounts were found to contain shares.
The number of operable BO accounts came further down to 25.7 lakh on November 1 this year.