The white paper preparation committee report has revealed that the shameless impunity of the members of the ring despite evidence of their involvement in manipulation in the last 15 years during the Awami League government has brought the capital market to the worst position. The members of the manipulation ring committed fraud when the company came to the market through the initial public offering (IPO) during the Awami League government. They committed fraud, placement-trading and share manipulation in the name and anonymity. Through these, they embezzled over Tk 1 trillion or Tk 1 lakh crore of the investors.
People involved in the market say that what happened in the past year was done with the cooperation of the market regulator Bangladesh Securities and Exchange Commission (BSEC). BSEC has intervened in the market so much to benefit various circles of the government; which is not to say. Some such instructions come one way in the morning, another way in the afternoon. After the 2010 collapse, the two commissions are looking after the market, they are the ones who approved the IPO of fake companies. They encouraged placement trading. And they gave immunity to those involved in share manipulation. They have failed to manage the market. As a result, Bangladesh’s capital market is one of the worst markets in Asia.
The investigation report says that investors have lost confidence in the capital market due to irregularities in the past year. They are now stunned. Because, no legal action was taken based on the report of the 2010 investigation committee; rather, those named in the investigation report were given immunity, which has affected ordinary investors. The loss is not only to investors; rather, the country’s capital market is ahead of only Cambodia among Asian countries in terms of market capitalization.
A 2023 study by the Center for Policy Dialogue (CPD), a private research organization, found that 50 percent of traders say that transactions are carried out through manipulation in the capital market. 53.1 percent of traders believe that there are weaknesses in the activities of BSEC in managing the market. There are irregularities in the financial reports of 50 percent of the companies in the market. In addition, 56.3 percent of the companies that came to the market through IPOs are weak companies. The year with the highest number of weak companies coming to the market is 2022.
When asked about this, Dhaka Stock Exchange (DSE) Director Minhaj Mannan Emon told Daily Industry, “Thank you to the committee for highlighting 15 years of corruption and irregularities in the white paper report. During the previous government, in addition to not approving IPOs to weak companies, we have spoken to all stakeholders against those involved in share manipulation circles, but they did not listen; rather, without any regard for the rules and regulations, the commission of Professor Khairul Hossain and Shibli Rubaiyat-ul-Islam approved the IPO of bad companies involved in unscrupulous circles. They have also given immunity to the share manipulation ring. These two people are responsible for the deterioration of the capital market. I demand the maximum punishment for them.’
The report says that in the past year, a large network of manipulation was formed in the capital market between 205 influential entrepreneurial groups, issue managers, auditors and investors. Market intermediaries have gone bankrupt, their equity has become negative by Tk 30,000 crore. Those who are criminals in the banking sector were also behind the destruction of trust in the capital market.
The white paper on manipulation says that this disaster has revealed how powerful business groups and politically influential people cause huge losses to ordinary investors through share price manipulation. Despite public outrage and investigation, many of the key players behind this manipulation have avoided trial for political protection.
The white paper says that how manipulation is done in the capital market, several influential investors and institutions have violated the securities law and artificially increased the share price by making one-on-one transactions with each other. They trade shares of ‘targeted’ companies, where some investors sell shares and investors associated with them buy shares. This is how the active trading of shares of that company is shown. The book building process is manipulated in such a way that the valuation of the company is not understood.
The white paper says that vested interests have taken over some large mutual funds. In this case, the BSEC looked the other way. The Khairul Commission extended the period of closed mutual funds by an additional 10 years. This eroded investor confidence.
The white paper says that the margin loan ratio has been increased along with the increase in the index in the capital market. This fuels the rise of the capital market. The BSEC often tries to maintain the index by ignoring the increase in share prices. Whenever the prices start falling, the regulatory body starts its activities. The most controversial floor price system has tarnished the reputation of the capital market internationally. This has harmed the transactions of good companies, while encouraging market manipulation.
When asked about this, DSE Brokers Association of Bangladesh (DBA) President Saiful Islam said, “Through the white paper, everyone at home and abroad could know what happened in the capital market in the last 15 years. We believe that the government will take a future plan to compensate for the losses that investors and the capital market faced due to the chaos of the past. The new plan must contain instructions on how to keep the market healthy and restore investor confidence. Only then will we be able to bring investors.”
