Allegation of irregularities: Regulator seeks DSE directors’ share trading info

Infographic: TBS

The Bangladesh Securities and Exchange Commission (BSEC), the stock market regulator, has asked Dhaka Stock Exchange (DSE) directors to provide their share trading reports for the past year.

Currently, the DSE board consists of 12 members, including seven independent directors appointed by the BSEC and five shareholder directors — four from the primary shareholders of DSE and one from the strategic investor.

An allegation of share trading irregularities by Professor Abdullah Al Mahmud, an independent director on the DSE board, prompted the BSEC to ask for reports of share trading from all DSE directors.

At the beginning of this month, the regulator asked the conflict mitigation committee of the DSE to provide disclosure documents or reports filed by the directors last year, as mandated by the board of administration regulations.

However, whether these pieces of information have been submitted to the commission is not confirmed.

A BSEC official seeking anonymity told TBS that stock exchange directors may trade shares but periodically must disclose their reports to the conflict mitigation committee.

"As an allegation raised against an independent director about share trading, the commission is working on the disclosures or reports made by all the directors of the DSE," he added.

Meanwhile, the Financial Institutions Division on 25 June directed the BSEC to conduct an inquiry and submit reports within 30 working days over the allegation raised against Prof Mahmud.

The Financial Institutions Division directed the BSEC to take actions based on an investigation by the DSE regarding whether any action was found contrary to the laws, rules, regulations, or directives of the DSE.

It also directed the accused director to refrain from his duties during the investigation, and to promptly inform the Financial Institutions Division of the actions taken according to the BSEC and DSE investigation reports.

Besides, the DSE formed an inquiry committee to investigate the allegation against Prof Mahmud.

According to the board of administration regulations of the DSE regarding disclosures of dealing in securities by the directors of the exchange said that directors of the exchanges shall disclose periodically, with an interval of not more than one month, their trading activities including personal and institutional portfolio investment where such director has direct or indirect interest to the conflict mitigation committee.

DSE officials said that after getting the disclosures or reports from the directors, the mitigation committee will analyse the information, and if any breach of regulations is found, the committee will present it to the board. Then, the board will take proper action. 

Besides that, on 13 June in its board of directors meeting, the DSE formed a three-member committee to probe the allegation against Prof Mahmud. 

The probe committee will submit a report to the board after investigating the allegation within seven working days, as decided by the DSE in its board meeting today.

The three members of the committee are Rubaba Dowla and Kawser Ahmed, both independent directors, and Sharif Anwar Hossain, a shareholder director on the DSE board.

According to the DSE, these team members also serve on the Conflict Mitigation Committee of the bourse. 

But one member, Sharif Anwar Hossain, has withdrawn his name from the committee.

The board of administration regulations emphasises the avoidance of conflicts of interest among board directors.

It states, "No director of the board or any committee of the exchange shall participate in any decision-making or adjudication process in respect of any person or matter in which he is in any way, directly or indirectly, concerned or interested."

Furthermore, it restricts directors from engaging in business transactions with the exchange except those related to securities trading, with final decisions on conflicts of interest resting with the Conflict Mitigation Committee.

The BSEC had requested the DSE to refrain from presenting market reports, and analyses of the market situation to the board of directors in November last year as the regulator found, that the DSE regularly presents the info. 

Citing the conflict of interest, the BSEC letter requested not to present market information to the board of directors.