Brokerage firms will receive 75% of the interest earned in the Consolidated Customer Account, while the remaining 25% must be deposited to the Investors’ Protection Fund, which will be used to safeguard investors.

To enforce the decision, the relevant regulations will be amended following legal procedures.

The decision was made recently with the consent of the DSE Brokers Association of Bangladesh and a taskforce formed by the Bangladesh Securities and Exchange Commission (BSEC).

This measure aims to enhance the protection of investors and strengthen the overall regulatory framework. 

Although there was previously a directive to distribute the interest proportionally among investors, brokerage firms did not comply with it. 

They had sought a waiver from the BSEC, citing reasons such as the Covid-19 pandemic, economic downturn, and the slowdown in the stock market. However, based on the recommendations of the DSE Brokers Association of Bangladesh and the taskforce, the BSEC has now made the decision.

If the relevant rules are amended, brokerage houses may be entitled to 75% of the interest earned from the maintenance accounts and other related others, whereas they previously received 100% of the interest.

In August 2014, the Investors’ Protection Fund was formed to protect the interest of investors in case of any default by brokerage firms.

A Consolidated Customers’ Account is a separate bank account maintained by stockbrokers to hold unused funds from their clients’ beneficiary owner accounts. 

These funds are strictly to be used only for paying for securities purchased by the client or collecting commissions or fees owed by the client. Any unauthorised use of the funds from the Consolidated Customer Account results in a deficit. 

Saiful Islam, president of the DSE Brokers Association of Bangladesh, told TBS, “We have learned that 25% of the interest earned from the Consolidated Customers’ Account will be deposited to the Investor Protection Fund, while the remaining 75% can be utilised by brokerage houses to cover operational expenses. We have also been informed that a formal letter will be issued after amending the necessary regulations.”

He further said, “We agreed to this proposal as it provides a win-win solution. The proper utilisation of the Consolidated Customer Account interest will help protect investors’ interests. The Investors’ Protection Fund will be used exclusively for investor protection, and this will, in turn, support the market. This fund will play a crucial role, particularly during times of crisis.” 

A BSEC official, speaking on condition of anonymity, said brokerage houses had not implemented the directive, citing complexities and the slowdown in the stock market as reasons for seeking a waiver. Additionally, the stock exchanges did not provide detailed updates to the commission.

To protect investors’ interests and consider the consent of the DSE Brokers Association of Bangladesh and the taskforce, the commission made the decision. However, the official added that the commission must amend the relevant rules before implementing this decision.

Normally, an investor deposits money into their own portfolio to buy shares. However, the investor is often unaware of how much money has been generated over a certain period, making it difficult for them to raise any questions regarding this. Additionally, the stock exchange has not provided detailed reports, so it becomes challenging to calculate the amount generated each year in the Consolidated Customers’ Accounts. 

According to Securities and Exchange Rules, 2020, Interest earned from bank accounts opened for consolidated customers’ accounts will not be considered as income of the stock broker or stock dealer. 

The net interest income, after adjusting for bank charges, if any, must be distributed proportionately among the customers. Any undistributed interest income must be transferred to the Investors’ Protection Fund within 30 days of the end of each financial year. 

In case of any delay in transferring the said interest income to the Investors’ Protection Fund, an additional 2% interest per month will be charged on the delayed amount, which must also be transferred to the Investors’ Protection Fund. 

In June 2021, the regulator issued a directive stating that the interest earned from the Consolidated Customer Accounts held by a brokerage house in the bank must be distributed proportionately among the customers based on their share of the funds in the account. 

According to the conditions, if a customer deposits at least Tk1 lakh for a continuous period of one month during a fiscal year, they will be eligible to receive the interest. Furthermore, customers will only be entitled to the interest payment if the amount due is at least Tk500.

A brokerage house must deduct account maintenance fees and other charges from the interest earned from the consolidated customer account and then distribute the remaining amount proportionally among the respective customers.

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“It would be better to announce it by end of January, Time has come to coordinate monetary policy, budgetary policy and annual development budget and prepare a revised budget. We are trying to do that by end of January or in February so that everyone could be benefitted,” he said while briefing reporters after the ECNEC meeting at his ministry conference room.

He said once the revised budget is passed, the Bangladesh Bank will be able to implement its monetary policy, the Finance Ministry will know where to put the budget deficit, or how much foreign aid will be needed.

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The Planning Ministry will be able to plan to quickly complete the projects in its hands, said the adeviser.

He commented that if employment is not increased, the suffering of the people will not be reduced.

He noted that the revised budget is typically prepared by the end of March, coinciding with the conclusion of the third quarter.

“This budget [current budget for 2024-25 fiscal] is not prepared by us, the previous government formulated it. We want to revise this budget prior to that time [March],” he said, signaling what may be more of an emergency budget

But he said for that, the interim government needed some estimations like revenue collection from NBR and foreign aid flows.

“This will be needed to put the budget deficit at a tolerable level and revise the development budget,” he said.

The adviser mentioned that the burden of coordination has come on the development budget.

“We have to keep others intact. For sake of overall stability we cannot formulate higher deficit budget.”

Dr Wahiduddin Mahmud, who also oversee the education ministry, said there are so many demands from the public servants, to mitigate those there are issues like increasing salaries and allowances, and dearness allowances.

“So, it is difficult to put limit on the revenue expenditure. Therefore, we have to reduce the development budget,” he said.

But he mentioned that the reduced development budget does not mean that it would affect the growth in the economy.

“For the poverty reduction and employment it does not required heavy investment locally or especially in the rural areas. It requires the development projects to provide employment and benefit the local people.”

The adviser also said that the size of the budget is not important, the important thing is that the projects benefit the people, create employment and providing positive results in the livelihood of the people.

Regarding containing inflation at a tolerable level, the Adviser said that the government has been unable to reduce the inflation to a great extent.

“We have to reduce the inflation to maintain the macroeconomic stability. Remittances inflow is increasing, that is very good news. The balance of payments has returned to positive. Only inflation is yet to come down to a tolerable level.”

He said that Bangladesh Bank through its contractionary monetary policy and credit policy is trying to control inflation.

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During an investigation, the NBR’s Large Taxpayers Unit (LTU-VAT) discovered that the company violated rules by selling its products at prices higher than those reported to the revenue authority earlier without paying the corresponding higher taxes, according to NBR sources.

BAT pays taxes on its products when transferring them to the warehouse, based on the prices set by the NBR for that fiscal year. However, the company stored its products after paying taxes at the rates for one fiscal year, then sold the same products in the following fiscal year at higher prices without adjusting the taxes accordingly.

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A senior official from the NBR’s LTU-VAT department, on condition of anonymity, told TBS that initially, it was found that the tobacco company evaded Tk169 crore in VAT for FY24 through this method. Upon further investigation into the company’s stockpiled products from previous fiscal years, more evasion was found: Tk88.21 crore in FY23, Tk56.42 crore in FY22, and Tk65.92 crore in FY21.

The official confirmed that a notice was issued to BAT on 12 December, ordering the company to pay Tk169 crore in VAT evasion for FY24 within 15 working days. Separate notices were issued on 19 December for the payment of the total Tk211 crore evaded in FY23, FY22, and FY21.

In September last year, the NBR found that the company had evaded Tk2,054 crore in VAT and supplementary duty in 2016 by concealing information, and the legal dispute between the two parties is currently ongoing.

The NBR also found that another multinational company, Japan Tobacco International (JTI) Bangladesh, had evaded VAT using the same method employed by BAT. However, the amount of VAT evaded by JTI has not been disclosed.

In recent years, the prices of tobacco products, including cigarettes, have been rising in the yearly budget, and taxes are calculated based on the increased prices from the day the budget is presented in the parliament. The latest budget for the current fiscal year (FY25) was presented on 6 June this year.

According to VAT officials, before the budget placement, BAT transferred a large quantity of cigarettes to the warehouse after paying VAT, supplementary duty, and other taxes on the previous year’s set prices. However, after the budget was presented, the company sold the same cigarettes at higher prices.

TBS has obtained a copy of a notice from the NBR regarding the evasion of Tk169 crore by BATB in FY24. The letter states that BAT Bangladesh transferred cigarettes to the warehouse, paying a total duty-tax of Tk3,044.65 crore on the cigarettes, based on the effective price up to 5 June 2024 (the day before the FY25 budget placement). However, it later sold the stored cigarettes to buyers — dealers or distributors — at an increased price, amounting to Tk3,213.42 crore.

The letter further states: “By selling the cigarettes at an increased price, a duty-tax of Tk168.77 crore was evaded, which is recoverable.”

When contacted, BAT declined to comment on the matter.

In response to written questions from TBS, a company spokesperson replied, “Given the confidential nature of the ongoing matter, we cannot comment further.”

A loophole in VAT collection?

According to another notice from the NBR regarding BAT’s VAT avoidance for FY23, seen by TBS, VAT on tobacco products is generally collected at the point of production, before moving products to warehouses, not at the retail level.

The notice states, “Under legal provisions, if it is a cigarette manufacturing factory, each removal of product consignments from the factory will be considered a supply, and a challan must be issued for each supply.”

However, since the VAT applicable at the time of supply has already been paid during the transfer of the tobacco products, the question arises whether additional duty or VAT will apply when the products are later sold at higher prices.

The NBR notice provides clarification, stating that while each removal of product consignments from the factory is considered a supply, there is no scope for selling these products at prices exceeding the reported amount. Since the products were sold at a higher price, additional tax will be levied on the increased price.

However, officials from the NBR’s LTU-VAT department confirmed that increased supplementary duty will not apply in this case.

NBR’s Second Secretary for VAT Policy, Barrister Md Bodruzzaman Munshi, told TBS, “We have informed the LTU-VAT of the legal explanation regarding this matter, based on which a demand letter has been issued to BAT for the payment of additional VAT.”

He declined to provide further details.

An NBR official, on condition of anonymity, told TBS, “If the tobacco companies had sold products according to the declared Maximum Retail Price (MRP), there would have been no issue. But BAT and JTI sold products at prices higher than the MRP. They will be required to pay VAT on the excess price, as per the law.”

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In a price-sensitive information disclosure, Monno Agro said the commission on 12 December approved a 22% stock dividend for year 2023-24 ended on 30 June 2024 although the company’s board of directors had proposed a 25% stock dividend.

The record date for entitlement to the regulator-approved dividend has been fixed for 22 December.

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The dividend is subject to approval by shareholders at the upcoming annual general meeting (AGM) scheduled for 28 December.

According to disclosures published in November, Monno Agro had recommended a 25% stock dividend to utilise the retained amount as capital, with the dividend declared from its accumulated profits.

Previously, the company paid a 3% cash and a 32% stock dividends for FY23. Then, the 32% stock dividend was issued to meet the regulator’s requirement, as the company’s paid-up capital was below Tk30 crore.

Currently, its paid-up capital is Tk3.60 crore with 36.06 lakh shares, according to the Dhaka Stock Exchange (DSE).

FY24 profit

According to price-sensitive information, Monno Agro’s net profit for FY24 slightly declined by 2.19%.

At the end of FY24, its net profit after tax fell to Tk77.37 lakh, compared to Tk79.11 lakh in the previous fiscal year.

Its earnings per share stood at Tk2.15, down from Tk2.19 in FY23.

Monno Agro is a subsidiary of Monno Group of Industries. The company was listed on the DSE in 1982.

Sponsor-directors hold 32%, institutions 7.34%, foreign investors 0.09%, and the general public 60.57% of the company’s shares.
Its share price closed at Tk419 each on the DSE on Sunday.

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The sponsor directors are Chairman Mohammed Younus, Managing Director Mahfuza Younus and Director Mohammed Javed Noman.

The decision was made at a BSEC meeting on 3 December, as per a press release issued on Thursday (5 December).

In the same meeting, the commission imposed a Tk10 lakh fine on stock market investor Mahfuza Akhter and a Tk40 lakh fine on Dewan Salehin Mahmud for manipulating the price of Prime Finance First Mutual Fund shares. The commission also fined Monarch Holdings Tk5 lakh for investing its funds outside its core business.

Monarch Holdings was directed to withdraw its investment in Softvion Ltd and return the money. If it fails to comply within the stipulated time, a penalty of Tk10,000 per day will be imposed.

The press release stated that between 17 August and 29 September 2023, manipulative trading in the shares of Paramount Insurance took place.

This trading violated relevant securities laws, prompting the commission to fine each director of the board, including the managing director. However, independent and nominated directors are exempt from the penalty.

The fines must be paid as a personal liability, the press release noted.

According to the Dhaka Stock Exchange (DSE), on 17 August, the share price of Paramount Insurance opened at Tk42.70 each. By 19 September, the price had closed at Tk75.40, marking a 76% increase.

Available reports for FY23 showed that three sponsor-directors of Sonali Paper collectively own a 67.51% stake in the company.

Its chairman Mohammed Younus holds 13.79%, managing director Mahfuza Younus owns 13.76%, and director Mohammed Javed Noman holds 39.94%.

The remaining 32.49% stake is held by institutional investors and the general public as of October.

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The interim government aims to bring inflation down to 7 percent by next June, he said.

“We will bring it down to 5 percent by the next fiscal year 2025-26. The main goal is to bring inflation down to 4-5 percent. I hope it is possible,” he said.

The BB governor said this while speaking as the chief guest at a dialogue on “Tipping points of reform agenda for the turnaround of the banking sector of Bangladesh” at the Bangladesh Institute of Bank Management (BIBM) auditorium in the city.

Director General of BIBM Dr Md Akhtaruzzaman chaired the programme.

The prices of vegetables and food items are high in the market due to floods, Mansur said in his speech.

“It will come down soon. If we can bring inflation down to 7 percent, we will reduce the bank’s interest and policy interest rate,” he added.

Four pillars of the economy — banking sector, capital market, insurance and bond market — are strong in the country, he said.

“We have not been able to develop the bond market. As a result, the banking sector alone has to fulfil a big responsibility in our country. If we cannot find long-term sources of the economy, we will remain dependent on the banking sector,” he added.

A background paper “Tipping points of reform agenda for the turnaround of the banking sector of Bangladesh” was presented in the programme by Professor (Selection Grade) of BIBM Dr Prashanta Kumar Banerjee.

A good number of participants, including chairman, managing directors, senior bank executives, academicians, media representatives, faculty members of BIBM, took part in the programme.

Director for Research, Development and Consultancy and Associate Professor of BIBM Md Shihab Uddin Khan delivered the welcome speech.

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Khan said he was not the authority to raise gas price and proposals have been sent to Bangladesh Energy Regulatory Commission (BERC) for further consultation, while views must also be availed from industry people.

This is a conflicting issue because the industries need gas, but at the same time the government also needs to reduce the subsidy burden, he said.

The adviser was responding to a query of a journalist at a roundtable on “FDI Ecosystem to Boost Sustainable Economic Growth” organised by the American Chamber of Commerce in Bangladesh (AmCham) at The Westin Dhaka on Monday.

Businesspeople from both America and Bangladesh, government high ups, diplomats, leaders of different business chambers and trade bodies and experts attended the roundtable.

The adviser said he was not the authority to raise gas price and proposals have been sent to the BERC for further consultation

The industry people, especially spinning mills, have been complaining over the last few years about inadequate gas supply severely affecting production, causing most to run at just 50 percent capacity.

Bangladesh has been having to import liquefied natural gas (LNG) as local supplies of natural gas can hardly meet the demand of industrial units.

There is no easy solution when it comes to gas prices and supplies may not improve in the short- term, but there are plans to import more LNG to meet industrial demand, said Khan.

Many suggest increasing supplies to industrial units by limiting that to refuelling stations and homes, but that will put transportation and cooking in difficulties, he said.

The LNG is imported at Tk 70 per unit and sold at Tk 30 to industries, for which Tk 30,000 crore has to be paid a year in power sector subsidies while Tk 20,000 crore in gas supply, he said.

Some bottlenecks within the government must be removed to attract more foreign direct investment (FDI), said Lutfey Siddiqi, the chief adviser’s special envoy on international affairs.

He said they were working with various ministries and regulatory bodies to develop a culture that supports foreign investment, not as regulators, but as facilitators, according to a statement from AmCham.

The statement quoted both Khan and Siddiqi as saying that the business community would soon be able to avail a better One Stop Service (OSS) portal of Bangladesh Investment Development Authority, which would help resolve current grievances.

The duo encouraged business to continue to share their challenges and suggestions to foster a more conducive environment for FDI.

Eric Walker, vice-president of AmCham and president of Chevron, Peter D Haas, strategic adviser at Excelerate Energy and former US ambassador to Bangladesh, and Md Habibur Rahman Bhuiyan, country manager of Excelerate Bangladesh, also spoke.

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The three-member panel, set up on 27 November, will inspect the company and submit its report to the commission within 60 working days, according to BSEC officials.

Sources in the company, speaking on condition of anonymity, told The Business Standard that they have received a letter regarding the inspection. The inspection team plans to conduct a physical visit and check equipment as per the commission’s order, they added.

BSEC Additional Director Md Faruque Hossain heads the committee, which also includes Deputy Director Md Shahnows and Assistant Director Md Ariful Islam.

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Earlier in March this year, the commission had constituted an inspection team for this purpose. However, the previous team was unable to proceed due to a commission decision. The new commission has now taken the initiative to resume the inspection.

In November 2020, the commission approved Mir Akhter Hossain Limited to raise Tk125 crore through an initial public offering under the book-building method to expand its business, purchase equipment, and repay bank loans. The cut-off price of Mir Akhter shares was set at Tk60 each after the bidding process.

The IPO funds were supposed to be utilised within 18 months. However, the construction and engineering firm completed its use of IPO proceeds by September last year.

In March 2022, the securities regulator approved the issuance of the Mir Akhter Zero Coupon Bond worth Tk249.90 crore to refinance debt and increase capital equipment. The bond’s issue price was Tk207.17 crore, with a discount rate of 7% to 9%.

From July to September 2024, the company’s consolidated revenue dropped by 50%, to Tk37.67 crore from Tk74.83 crore during the same period in the previous year.

During this time, its consolidated net profit after tax fell by 12%, to Tk2.82 crore from Tk3.21 crore a year ago. Its consolidated earnings per share stood at Tk0.23, while its net asset value per share was Tk50.32 as of the end of September 2024.

In FY24, the company recommended a 10% cash dividend for its shareholders. During the year, its revenue stood at Tk268.74 crore, while its profit after tax amounted to Tk30.04 crore.

As of January 31, 2024, sponsors and directors jointly held 48.58% of the company’s shares, institutions held 4.26%, and general investors held 47.16%.

The company’s share price increased by 9.71%, to Tk33.90, on the Dhaka Stock Exchange on Thursday.

Currently, Mir Akhter Hossain Limited has 33 ongoing projects worth Tk9,268 crore, according to the company’s annual report for fiscal year 2022-23.

Some of its notable projects include the Dhaka-Sylhet National Highway, the development of Shah Amanat International Airport, the construction of a bridge over the Payra River, and numerous road projects across the country.

Despite a decline in business performance since its stock market listing in 2021, Mir Akhter looks forward to a promising future due to its successful bids for numerous government projects, according to market insiders.

In its FY23 annual report, the company stated that the construction sector has benefitted from increased capital allocation in the government’s annual development budget.

The report also highlighted several challenges faced by the country, including trade barriers, the appreciation of the dollar, high energy prices, and the ongoing Russia-Ukraine war.

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“To meet bonafide needs, it has been decided that such companies /firms can open and maintain foreign currency accounts with authorised dealers (ADs) in the name of ARQ,” the central bank said in a notification on Monday.

Earnings of the companies will have to be in foreign currency, the notification said, adding that ARQ accounts can be credited up to 10 per cent of the receipts in foreign currency.

Besides, the firms will have valid permissions from competent authorities, if applicable, and are active members of trade associations representing the relevant sectors, it added.

On the other hand, merchandise exporters and service exporters are entitled to retain a permissible portion of their repatriated export proceeds in Exporter’s Retention Quota (ERQ) accounts.

Balances in ERQ accounts may be used by the exporters for bonafide business purposes.

Like exporters, resident companies/firms working as agents/trade facilitators need to make payments abroad for bonafide business purposes, the central bank explained.

“We’ve allowed buying agent companies to operate the ARQ accounts to facilitate export earnings of Bangladesh,” a senior official of the BB told the FE while explaining the main objective of the notification.

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At a programme in Dhaka yesterday, they also recommended that the authorities ensure the rights of female workers are more effectively protected and take steps to formalise informal sectors, which currently employ roughly 85 percent of Bangladesh’s 8.5 crore workforce.

The Centre for Policy Dialogue (CPD) and Christian Aid jointly organised the programme, titled “Reforms in Workers’ Livelihood, Workplace Safety, and Rights Issues: An Agenda for the Interim Government,” at the CPD office. Khondaker Golam Moazzem, research director at the CPD, moderated the discussion, while Tamim Ahmed, a senior research associate at the CPD, presented the keynote paper.

On November 18 last year, the interim government formed the Labour Reform Commission to propose reforms aimed at improving labour rights and workers’ welfare. The commission was created to address various structural, institutional, and operational weaknesses concerning workers’ lives and livelihoods.

After working for more than a month, Syed Sultan Uddin Ahmed, head of the commission, said he has been facing three kinds of pressure: high expectations from a large number of deprived workers, a limited 90-day timeframe for preparing recommendations, and weak data and research related to labour rights, which were mainly compiled under pressure from international donor groups.

At the programme, Ahmed said that local business communities, especially small entrepreneurs, are also putting pressure on him, as they are struggling to manage their businesses.

He observed that “modern-day slavery is taking place” in various local sectors, which he said was unexpected. “Moreover, in the informal sector, the country has bonded and enforced labourers who have no protection of their rights under the law and lack social safety protections,” Ahmed said. “Many sectors do not have maternity leave, job protection, or worker rights.”

For example, Ahmed elaborated on the construction sector, noting that employers and contractors remain almost invisible until a worker dies at the workplace. He also addressed the lack of voting rights for migrant workers, who contribute significantly to the state coffers.

The head of the labour reform commission emphasised the need for an accurate worker database. He stated that minimum protection and standard wages are necessary for a balanced society and economy, adding that the country can hardly enjoy the transition to a developing country with wage discrimination.

He confirmed that these issues would be included in the recommendations to be submitted to the chief adviser of the interim government.

Kamran T Rahman, president of the Metropolitan Chamber of Commerce and Industry (MCCI), said that child labour had been eliminated from the garment sector long ago, but there are still child labourers in some informal sectors. According to Rahman, currently, 1 crore people are employed in formal sectors and 5.5 crore in informal sectors.

An average Bangladeshi migrant worker earns 2.5 percent less than the average Indian worker and 4.0 percent less than Sri Lankan workers, as local workers are sent abroad without skill development and training, he said.

Rahman emphasised that nobody wants factory closures, which is why workers’ responsibilities must be considered alongside their rights.

Moazzem noted that not all entrepreneurs are currently ready to implement the national minimum wage, which is why it should be introduced in phases. Currently, 42 sectors have a minimum wage structure, and the government plans to include four more soon. More than 140 sectors could also be considered for inclusion in the minimum wage structure, he said.

He added that the reform commission’s responsibilities should not be limited to submitting the report but should also include follow-up actions on its implementation.

Tamim Ahmed suggested reforms in wage payment, rates, implementation of the wage structure, collective bargaining, social insurance, safety, and proper industrial dispute resolution.

Farooq Ahmed, secretary general of the Bangladesh Employers’ Federation, said that although enforced labour exists in some informal sectors, bonded labour does not occur in Bangladesh.

Nuzhat Jabin, programme manager of Christian Aid Bangladesh, and Taslima Akhter Lima, a member of the Labour Reform Commission, also spoke at the programme.

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