Compliance concerns deter local firms from going public: BSEC chair

Masud Khan says the regulator wants to facilitate the capital market, but local companies need to overcome their reluctance to comply with regulatory requirements.

Local businesses and prospective issuers remain hesitant to go public due to concerns over corporate compliance, governance requirements and the appointment of independent directors, said Bangladesh Securities and Exchange Commission (BSEC) Chairman Masud Khan.

Speaking at a seminar at the DSE Tower today (6 October), Masud Khan said the regulator wants to facilitate the capital market, but local companies need to overcome their reluctance to comply with regulatory requirements.

The seminar was jointly organised by the Bangladesh Association of Publicly Listed Companies and the Bangladesh Merchant Bankers Association as part of World Investor Week 2026.

Titled “The Future-Ready Investor: Strengthening Resilience, Managing Digital Risks and Investing with Confidence”, the seminar brought together market stakeholders to discuss investor resilience, digital risks and confidence in the capital market.

BAPLC President Riad Mahmud chaired the session, with BSEC Chairman Masud Khan attending as chief guest alongside BSEC Commissioner Nafeez Al-Tarik, Dhaka Stock Exchange (DSE) Chairman Mominul Islam, and Chittagong Stock Exchange (CSE) Chairman AKM Habibur Rahman as special guests.

Shift in IPO vetting and governance concerns

Addressing corporate apprehensions, the BSEC chief announced that the regulator will no longer inspect or scrutinise paper-based documentation during the initial public offering (IPO) process, passing that vetting duty entirely to the stock exchanges.

He noted that in the past, the primary focus was on inspecting sacks of papers rather than analysing a company’s past performance, business model, and reputation. While auditors and stock exchanges will thoroughly verify documentation without BSEC asking questions regarding IPO paperwork, companies must fulfill their compliance obligations.

Reassuring business leaders, the commission noted that appointing independent directors does not alter core strategic control, as key decisions remain driven by principal owners. Furthermore, maintaining unrecorded financial transactions is becoming virtually impossible as banking, taxation, and financial ecosystems transition toward greater digitisation.

Market depth, direct listing, and mutual fund overhaul

Reflecting on the commission’s performance over the past three months, BSEC Chairman Masud Khan highlighted the need to address Bangladesh’s low stock market capitalisation, which currently stands at around 6% of GDP, compared with more than 130% in India.

To address this low depth, the regulator plans to reduce the IPO approval timeline to around three to three-and-a-half months.

The BSEC is also revising its direct listing rules to attract reputable state-owned enterprises, multinational companies, financial institutions and large private corporations with annual turnover or total assets exceeding Tk1,000 crore.

Simultaneously, the regulator is overhauling the mutual fund industry. Emphasising that close-ended funds will receive no further extensions, the BSEC reaffirmed that fund management will be reviewed or liquidated if the Net Asset Value (NAV) drops below 75% for six consecutive months, while plans are underway to introduce trained mutual fund agents following successful regional models.

Masud Khan also said, mutual funds currently cannot invest in bonds, which is absurd. It should be lifted.

Auditor accountability and rating agency surveillance

BSEC Chairman said, to rebuild structural integrity, the regulator has eliminated the requirement for stock exchanges to seek prior BSEC approval before initiating internal inquiries.

He said, financial disclosure standards will be rigorously enforced by holding auditors directly accountable for validating financial statements and documentation.

Furthermore, credit rating agencies have been placed under strict surveillance to prevent inflated or misleading ratings from distorting market assessments.

Rising digital scams, AI surveillance, and stringent rules

Delivering the keynote presentation, Southeast Bank Capital Services Limited Managing Director Mominul Haque warned that stock market scams have become increasingly sophisticated. Fraudulent syndicates are now using artificial intelligence (AI) technology to generate fake documents and lure unsuspecting investors into Ponzi schemes on platforms like Facebook, WhatsApp, and Telegram.

He cautioned investors against six key red flags, including guaranteed high returns, payoff platforms, withdrawal fees, artificial pressure or urgency, unregistered advisers and unverifiable information.

To tame capital market scams and combat digital fraud, the BSEC is preparing comprehensive countermeasures, including unified back-office software, AI-driven surveillance, digital orders, limits on refunds, raised flags over suspicious trading, and decisive enforcement actions, he said.

Stricter compliance rules, including stringent circuit breakers, are also being enforced for Z-category and non-compliant companies to manage artificial price volatility and curtail speculative runs driven by market manipulation, said the DSE Chairman Mominul Islam.

Addressing the gathering, DSE Chairman stressed that low floating shares and shallow market depth leave the market highly vulnerable to price manipulation.

He urged a pivot toward expanding product offering, such as accelerating bond market development and simplifying listing rules, and expanding institutional participation to cushion short-term volatility.

He emphasised that traditional surveillance confined to brokers and issuers is no longer sufficient, calling for AI-driven keyword detection to track unauthorized digital advisors and online fraud syndicates.

CSE Chairman AKM Habibur Rahman emphasised the necessity of building “future-ready” investors through portfolio diversification, risk resilience, and financial literacy.

He noted that spreading investments across diverse asset classes and maintaining an adequate liquidity buffer prevents panic selling during market downturns.

Stating that investor confidence relies on evaluating fundamental metrics rather than unverified market rumors, he concluded that emotional discipline, reliance on registered intermediaries, and personal caution remain the ultimate safeguards against capital market fraud, he added.

Source: The Business Standard