A group of investors – through manipulations – raised the share prices of Daffodil Computer by 74% from December 2018 to mid-2019 and it took the market regulator three years to prove their guilt and take punitive action against them.
On 18 May this year, the Bangladesh Securities and Exchange Commission (BSEC) fined Rezaur Rahman, director of AIBL Capital Market Services, Tk3 lakh, Farida Hossein, a client of UCB Stock Brokerage, Tk1 lakh and Maksuda Ahmed, a client of One Securities, Tk2 lakh for the manipulation.
Currently, Rezaur is the managing director of AIBL Capital Market Services, Maksuda is his wife and Farida is his sister-in-law.
According to the BSEC charges, the three raised the prices of Daffodil Computer shares through a series of transactions and a false and misleading appearance of active trading among themselves which is a violation of the securities laws.
BSEC and stock exchanges have state-of-the-art surveillance systems for monitoring share transactions to identify those who do manipulation using such means. This surveillance system was introduced after the 2010 market collapse.
Despite the modern mechanism, the regulator could not get out of the practice of taking two years to complete an investigation and one year to dole out punishment.
A top official at a brokerage firm said on condition of anonymity that the commission took a long time to punish the perpetrators. On top of that, the punishment is negligible compared to their crimes.
"Therefore, the influence of manipulators in the stock market has never diminished. Although a few investors are making profits through manipulations, general investors are losing their capital. Which is disrupting market order and leaving investors distrustful," he added.
After the 1996 market collapse, there was a demand to bring the perpetrators to justice. Although the culprits have been identified in the investigation, the real culprits remained out of reach. And the process of bringing the perpetrators under punishment was also slow.
The same picture was seen after the 2010 market collapse. Although an investigation was led by the late Ibrahim Khaled, a former deputy governor of the central bank, no action was taken as per the recommendations. That is why the influence of the traders in the country's stock market is increasing.
From April to November 2021, the share price of Delta Life Insurance has increased by 274%. Earlier this year, the Dhaka Stock Exchange (DSE) investigated the reason for this unusual price increase. DSE found evidence of the involvement of controversial investor Md Abul Khayer, alias Hero and his associates.
The stock exchange also submitted its investigation report to the BSEC. Until the last update, the regulator had called Md Abul Khayer and his associates for a hearing.
Md Abul Khayer was accused of manipulating the shares of Safko Spinning in 2021.
There are also allegations that this investor was behind the abnormal rise in share prices of insurance companies in 2020. Although many people have suffered losses by investing in these companies, the main culprits have not been brought under punishment.
A top official of an asset management company said that the stock market is being manipulated daily by taking advantage of BSEC's procrastination in awarding punishment. And for this reason, despite many initiatives, there is no discipline in this market. Instead, the BSEC is preoccupied with how to transact in the market and increase the index.
None of the BSEC officials agreed to comment on the matter. However, an official said on condition of anonymity that it was not easy to punish a person after bringing him under the law. There are many steps to go through. Moreover, due to a lack of manpower in BSEC, work cannot be done quickly.