The Bangladesh Securities and Exchange Commission (BSEC) has begun the process of cancelling the registration certificates of six of the country’s merchant banks for long failing to meet the prescribed net-capital condition and for a shortfall in financial capacity. It has also decided to investigate and seek explanations to examine the causes of the net-capital shortfall at several other merchant banks.
According to the commission’s decision, the merchant banks whose registration certificates are being cancelled are Fas Capital Management Ltd; Imperial Capital Ltd; NDB Capital Ltd; Riverstone Capital Ltd; Hal Capital Ltd; and Roots Investment Ltd.
According to decisions of several BSEC commission meetings and connected sources, the step was taken on the basis of the recommendations of a special investigation report. In the commission’s view, the firms concerned had long failed to meet the minimum financial-capacity condition, had not properly followed various rules and regulations, and in many cases were in an inactive state.
BSEC executive director and spokesperson Abul Kalam said: “The financial-capacity conditions set by the regulator are mandatory for every merchant bank. Action is being taken under existing law and rules against firms that have long failed to maintain the prescribed net capital. Investigations have also been ordered into the real causes of the net-capital shortfall at two firms. If any irregularity or rule violation is found in the investigations, action will be taken against those concerned under the law.”
Investigations and explanations sought. The commission has ordered separate investigations into Unicap Investments Ltd and GSP Investment Ltd to examine the causes of their net-capital shortfall. These investigations will be conducted by the BSEC’s Market Intelligence and Investigation Department. Meanwhile, BRAC EPL Investments Ltd has been asked to explain its net-capital shortfall, and directed to present its explanation and the progress of raising its net capital at the next commission meeting.
Under the Securities and Exchange Commission (Merchant Banker and Portfolio Manager) Rules, 1996, a merchant bank’s net capital must be at least 50 percent of its paid-up capital. If net capital falls below the prescribed limit, questions arise over the firm’s financial capacity, and in such a situation the commission may seek an explanation, review activities or take necessary regulatory measures, including cancelling registration.
Market participants say the BSEC’s step against firms that have failed to meet the minimum net-capital condition will send an important message on ensuring financial discipline, accountability and good governance among capital-market intermediaries, and that the investigations will also clarify the firms’ true financial condition. There are currently 66 BSEC-registered merchant banks in the country. Earlier, the commission had also begun cancelling the registration of CAPM Advisory over allegations of giving false and misleading information in a prospectus.
বাংলায় মূল প্রতিবেদন পড়ুন · Read the original Bengali report