9 Beximco share manipulators fined record Tk429 crore

In a move reflecting its firm stance against market manipulation, the newly restructured Bangladesh Securities and Exchange Commission (BSEC) on Tuesday (1 October) imposed a record fine of Tk428.52 crore on a group of nine Beximco Limited share manipulators. 

According to BSEC officials, these investors had realised Tk477.72 crore in profits from trading Beximco Limited shares in violation of securities laws. The fine, representing 89.78% of their unlawful gains, is the largest ever in the history of Bangladesh's stock market.

They told TBS that the group, comprising four individuals and five companies, had interrelations and were directly or indirectly connected to Beximco.

During the two investigation periods — 28 July to 6 September 2021, and 2 January to 10 March 2022 — the nine investors held over Tk1,500 crore in unrealised profits from Beximco shares, as they had not sold the shares during that time.

Securities investigators uncovered multiple violations of securities laws by the group. A key violation involved series trading, where a significant number of shares were exchanged to create the false impression of active trading, aiming to mislead and attract other investors — an act that is punishable by law.

According to the BSEC, two brothers – Mosfequr Rahman and Momtazur Rahman – were fined Tk125 crore and Tk58 crore, respectively. Additionally, their companies — ART International, Jupiter Business, and Apollo Trading — were fined Tk70 crore, Tk22.5 crore, and Tk15.1 crore, respectively.

According to BSEC officials, the two brothers and their companies collectively held over 10% of the company's shares during the investigation without making a public announcement or notifying the regulators, which constituted a violation of the Substantial Share Acquisition Rules.

On the other hand, Marjana Rahman and her company, Tradenext International Limited, are required to pay fines of Tk30 crore and Tk4 crore, respectively. 

Abdur Rouf and his company, Crescent Limited, face fines of Tk31 crore and Tk73 crore, respectively.

Beximco Limited, primarily engaged in the textile sector while also operating in IT, engineering, and other industries, experienced a significant revenue increase to over Tk7,336 crore in FY22, up from Tk1,982 crore just two years prior. 

Its profit soared to over Tk1,200 crore, a sharp rise from the Tk100-Tk150 crore range it had been stuck in for years. Meanwhile, the company's share price jumped to Tk180 at the end of 2021, compared to less than Tk15 in July 2020.

However, the so-called "Beximco magic", long questioned by analysts, began to wane after the company raised Tk3,000 crore through a Sukuk bond in late 2021. 

Even before Sheikh Hasina's departure, Beximco's revenue and profit for the first nine months of the fiscal 2023-24 dropped by 63% and 89% year-on-year, respectively.

Currently, its shares, which have a face value of Tk10, are stagnant at a floor price of Tk115.6, leaving thousands of investors in distress.

The company has also cited a court stay order to retain the same auditor for over two decades, in contrast to other listed firms that are required by securities law to change auditors every three years.

The Beximco links  

In 2022, Jupiter Business and Tradenext International secured seats on the board of Fareast Islami Life Insurance Company Limited after acquiring its shares. The two companies nominated senior executives from Beximco Group to represent them on the insurer's board.

Tradenext International nominated Mostafa Zamanul Bahar, executive director of Beximco Group, while Jupiter Business recommended Ali Nawaz, chief financial officer of Beximco Pharmaceuticals; and Masum Mia, general manager of Beximco Textiles.

While talking to TBS, Crescent Ltd's Director Abdur Rouf recently claimed he was an employee of Beximco Group and that he worked as its Group Insurance Consultant. 

"My signatures were taken on some documents at different times, but I do not know anything about it," he said.  

Ali Nawaz, who served on the board of Fareast Islami Life Insurance as the nominated representative of Jupiter Business, told TBS, "I am not aware of whether Jupiter Business is an associate company of Beximco."

When asked why he was nominated by Beximco, he said, "Salman F Rahman told me that the government wants to improve the position of the insurance company. As part of this, he offered me the role of representative for Jupiter Business. Accordingly, I was nominated as a director."

No action was taken earlier

The Dhaka Stock Exchange's (DSE) Investigation Department submitted two reports on Beximco share manipulations to the BSEC over two years ago. 

However, under the leadership of then-chairman Professor Shibli Rubayat Ul Islam, the regulator did not take any enforcement actions until his departure following the fall of the Awami League government on 5 August.

Experts and BSEC officials said it was because of Shibli Rubayat-Ul Islam's nexus with Beximco Vice Chairman Salman F Rahman, who was the private industries and adviser to the ousted prime minister Sheikh Hasina.

They said Shibli allowed Salman and his associates a blank cheque for non-compliant gains from the capital market through stock price manipulation and issuance of gigantic bonds worth over Tk4,000 crore since 2020.

Salman Rahman is now in police custody and Shibli recently resigned as BSEC chairman.

The new commission, led by Chairman Khondoker Rashed Maqsood, took charge on 18 August. At a recent press conference, Maqsood said that the commission would not tolerate any irregularities or misconduct in the market like in the past.

A ray of hope

The Bangladesh stock market, rarely trusted by the masses due to a prolonged lack of integrity, might start seeing a positive change if the regulator unbiasedly upholds good governance, said Md Moniruzzaman, a chartered financial analyst heading Prime Bank Securities.

"Historically, we were seeing market manipulations were not stopping as it used to cost fraudsters even less than the legitimate tax in the economy," he told TBS.

The highest ever fine prior to the recent change in the BSEC was at best 35% of the booked profits from manipulative schemes, he recalls.  

In civilised markets, securities frauds usually result in bigger penalties than the gains alongside bans and court cases, he added.