The capital market stabilization fund is being created with the unallocated dividends of the listed companies and the unclaimed money held by the investors. The regulatory body Bangladesh Securities and Exchange Commission (BSEC) released the draft of the fund on February 22. The commission will finalize it after verifying the public opinion. The commission thinks it is possible to set up the fund in the next three to four months.

According to BSEC sources, after the new commission took charge, the Dhaka Stock Exchange (DSE), Chittagong Stock Exchange (CSE) and Central Depository Bangladesh Limited (CDBL) first issued a letter on November 12, 2020 asking for information on the dividend distributed to the listed companies. There, the three companies were asked to send a letter to the companies asking for information within the next three working days. The DSE later directed the companies to provide the information by November 10. However, at the request of Azam J Chowdhury, president of the Bangladesh Association of Publicly Listed Companies (BAPLC), the BSEC extended the deadline by another seven days. After that, on November 18, 2020, information was sought from Dhaka Stock Exchange (DSE), Chittagong Stock Exchange (CSE) and Bangladesh Merchant Bankers Association (BMBA). BSEC Deputy Director.

According to commission sources, initially the size of the fund will be Tk 22,000 crore. Of this, various companies have about Tk 1,600 crore in cash. The rest is in right or bonus shares. However, the information about the amount of unclaimed money in brokerage houses and merchant banks did not reach BSEC. All in all, BSEC is hopeful of supporting the capital market by forming a fund in the next three to four months.

Mahbub H Majumder, chief executive officer of AFC Capital, told SunBD that the new commission has been working to boost investor confidence since taking office. The reason for the positive decision is the capital market. Investors have started dreaming anew.

He further said that the initiative taken by BSEC to invest in undistributed dividend capital market is surely good news. However, if this money can be invested properly, it will be much better for the capital market. If for some reason the investment is not properly there will be no limit to the suffering.

BSEC Commissioner Prof. Sheikh Shamsuddin Ahmed told SunBD that BSEC is working to set up a fund for capital market development. These funds are in small size in different organizations. We want to combine these and use them for capital market investors.

What is in the draft:

According to the draft rules proposed by BSEC, all undistributed dividends and money and shares lying with brokerage houses and merchant banks for more than three years will be transferred to the fund. Three years will be calculated from the day of declaration or approval of dividend or record date. In this case, if any interest is earned as cash dividend or money is deposited in the bank, it will also have to be paid in this fund.

According to the commission sources, the concerned investors will be able to claim it even after the transfer of shares or money to the fund. The relevant company or asset management company or brokerage house or merchant bank has to apply with proof of their claim. The investor’s shares or money will be refunded within one month of the application.

The draft further proposes to transfer the funds to the concerned institutions along with specific information on how much undistributed dividends or money or shares an investor owes. However, the publication of this list is not in the rules. In many countries, including neighboring India, the list is published and updated on the website by related companies and funds.

The draft rules further state that the stabilization fund will be managed by an 11-member Board of Governors, with the BSEC nominating three members in addition to its chairman. Besides, there will be one member each from Dhaka Stock Exchange (DSE), Chittagong Stock Exchange (CSE) and Central Depository Bangladesh Limited (CDBL), CCBL, (FCA, FCMA and CFA), BAPLC. On the other hand, the head of the fund will be the Chief of Operations. The commission will form the first board.

The proposal further states that shares will be traded or lent or borrowed from the fund to increase the liquidity and depth of the market. There will be no loss of funds when trading shares, there will be specific guidelines, there will be a risk management and audit committee.

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