The Bangladesh Securities and Exchange Commission has finally released a set of rules, which will pave the way for creating a special fund to aid revive the capital market.
Through a gazette notification, the long-awaited rules on the formation of the market stabilisation fund came into effect on June 27.
Previously, the BSEC has taken the decision to form a Tk 210 billion worth ‘Capital Market Stabilization Fund’ on this topic.
Other than aiding the market, the investors’ long-pending claims of stock dividends and rights shares or un-refunded IPO (initial public offering) will be settled via the operation of the fund.
Direct sales and buy of listed securities will be conducted with the fund, under the supervision of a high-profile board of governors.
Other than that, the intermediaries of the market will be capable of getting loans at a nominal interest rate from the fund.
A maximum of 40 per cent of the cash balance of the fund might be utilised for the direct purchasing and selling of the listed securities, to ensure the depth of the market.
A minimum of 50 per cent of the cash balance of the fund will be utilised for providing loans to market intermediaries for refinancing as a margin loan.
The rest of the 10 per cent of the cash balance may be utilised for investment in other securities such as fixed deposits and government securities, based on the ceiling investment as defined by the rules. Tk 210 billion fund will come from the undistributed or unsettled dividends namely cash, stock and rights.
In line with the securities regulator’s information, 335 listed companies have unclaimed cash dividends worth Tk 9.56 billion and unclaimed or unsettled stock dividends worth Tk 199.86 billion.
The fund shall be operated by any organisation or Investment Corporation of Bangladesh (ICB) under the operation management service contract with the board of governors of the fund maintaining a bank account with any scheduled bank and a consolidated securities account or Beneficiary Owner’s (BO) account in the name of the Capital Market Stabilization Fund.
Based on the rules, the market stabilisation fund will be a perpetual one for functioning as a custodian of undistributed or unclaimed or unsettled dividend (cash or stock) or un-allotted rights shares or non-refunded public subscription money in favour of the shareholders or stockholders or investors.
In the case of any cash dividend which remains unpaid or unclaimed or unsettled or undistributed for a timeframe of 3 years from the date of declaration or approval or record date, shall be transferred by the issuer to the bank account of the fund within a particular timeframe.
In a similar fashion, the un-allotted or unsettled bonus shares and rights shares shall be transferred by the issuer in the dematerialized form to the BO account of the fund.
Based on the rules, on completion of due scrutiny, the investors’ claims regarding dividends or un-refunded IPO fund will be settled by 15 working days of receiving of recommendation with intimation to the concerned issuer.
11 members will be on the board of governors, including 1 oner chairman nominated by the commission.
The commission will nominate another three members, while the bourses will nominate two members, depository organisation one member and the association of listed companies one member.
One member will also be included from the professionals of chartered accountants or cost and management accountants or chartered secretaries or chartered financial analysts as selected by the commission.