The task force formed with an aim of overhauling the capital market will submit recommendations on three key areas — mutual funds (MFs), IPOs (initial public offerings) and margin loans — by March next year.
More than two and a half months after the formation of the task force, curiosity runs high among market operators, investors and other stakeholders about the progress in the task assigned to it.
In a recent interview with The FE, KAM Majedur Rahman, a member of the task force, said it would take around two years to cover all areas of the capital market and that was why it had set priorities.
Many of the market operators and investors are skeptical about any positive outcome from the reform move as they have not received any information from the task force.
Mr Rahman said parliament would have to be present to implement recommendations if that needed legal amendments.
“That’s why the task force is working to frame recommendations keeping in mind the enforcement within the existing laws.”
Many laws can be put to use to the benefits of both market operators and investors, he said. For example, both lenders and borrowers would have been safe if margin calls and subsequent forced selling were executed in line with the relevant laws.
Mr Rahman said investors lost confidence in the market mainly because of the poor performance of the mutual fund industry.
In its recommendations, the task force will emphasize how retailers can invest in MFs through professionals.
“Disclosures by the fund managers must be more accurate and inclusive,” said Mr Rahman, adding that the task force would consider how to ensure strict compliance of fund managers with securities rules and regulations while submitting recommendations.
The incidents of fund embezzlement by some fraudsters indicate that there was no guardian in the market, he said, which diminished unit holders’ trust in MFs.
“We will recommend stronger compliance in managing MFs,” Mr Rahman said.
The role of the trustees is yet to be up to the mark in the prevention of fund mishandling by asset managers. In a recent FE report, some trustees expressed their reluctance in working further for MFs, saying they are not as powerful as claimed.
“The task force will suggest ways to strengthen trustees so that they can play the expected role within the existing rules and regulations,” said the task force member.
While speaking on reforms tied to IPOs, he said the task force members were yet to receive feedback from all focus groups in this regard.
“The framing of recommendations on IPOs will be completed after receiving opinions from the focus groups.”
Easy bank financing is an obstacle to the listing of good companies.
“Before recommending a compulsory provision for fund raising from the capital market, the taskforce needs to sit with the regulators concerned and relevant stakeholders.”
Many listed companies have not yet met the requirement of a minimum 30 per cent joint stake of sponsor-directors in a firm.
“The taskforce will suggest how to ensure compliance,” Mr Rahman said.
On margin rules, there will be a ceiling on how much money a lender will be able to disburse to its clients.
The regulator previously brought itself down to a managerial role, which was why it failed to play the stipulated role in regulating the market, said the task force member.
“Both the bourses must be allowed to function [as intended by the law] and the task force will make recommendations in this regard.”
The Bangladesh Securities and Exchange Commission (BSEC) formed the task force on October 6 with a view to developing the stock market, boosting investor confidence, and ensuring governance of international standards.
The BSEC outlined 17 areas for the taskforce to focus on, including long-term financing through the capital market and accountability of market stakeholders.