The securities regulator, the Bangladesh Securities and Exchange Commission (BSEC), has taken up an initiative to modernize its nearly three-decade-old regulations governing merchant bankers to bring them up to international standards. Particular emphasis will be placed on setting eligibility criteria and licensing conditions, operational scope, and fiduciary duties for merchant banks. To that end, the commission has formed a four-member committee to update the Securities and Exchange Commission (Merchant Banker and Portfolio Manager) Rules, 1996.
An order was recently issued by the Legal Division’s CMRRC Department. The initiative aims to bring merchant bank and portfolio manager operations under a more modern, transparent and risk-based framework suited to current conditions.
BSEC Executive Director and spokesperson Md Abul Kalam said the 1996 regulations are now quite old. Necessary updates for the current context will be made, he said, with consideration also being given to what licensing conditions, operations and eligibility criteria should apply to merchant bankers both nationally and internationally. He said the central issue is determining the eligibility criteria for merchant bankers — particularly the operations and fiduciary duty toward investors of institutions designated as full-fledged merchant bankers, which will guide the regulatory update.
According to BSEC sources, the committee updating the regulations is convened by BSEC Director Md Mahmudul Haque. Other committee members are Additional Director Mohammad Golam Kibria, Assistant Director Amit Kumar Saha, and Assistant Director Mehran Ali, who serves as member secretary. The committee has been asked to submit its report to the commission, along with proposed amendments to the regulations, within 30 working days.
Sources say the new framework will clarify the criteria for licensing eligibility, financial capacity, professional competence, risk management and operational capability for merchant bankers. In particular, there is scope to place important emphasis on defining the operations and fiduciary duties of full-fledged merchant bankers toward investors. The accountability framework could also be strengthened around client fund and asset management, conflicts of interest, confidentiality, protecting investor interests, and failures to fulfill obligations.
There is also scope to clarify which types of merchant bankers may carry out which activities in relation to issue management, underwriting and portfolio management, alongside corporate bonds, sukuk, SME listings and various structured financial products. This would allow operations to be approved based on each institution’s capacity and risk profile, enabling qualified institutions to be given work opportunities while allowing early regulatory action against weaker institutions — strengthening investor protection, professional standards and market discipline.
Information indicates that the current 1996 regulations were designed primarily around the capital market structure of that era. Since then, the market has undergone major changes in size, types of investment and technology-driven operations. Although amendments have been made at various points, the version currently posted on BSEC’s website was last updated on August 24, 2021. The regulations need to be made more consistent with current realities, new financial products and evolving risk management practices.
Once the new regulations take effect, the scope of merchant bankers’ licensing and operations will become clearer. Accountability and responsibility in managing investors’ funds will increase. It will also create a pathway for taking swift action against weak institutions while giving capable institutions the opportunity to work with new financial products.
বাংলায় মূল প্রতিবেদন পড়ুন · Read the original Bengali report