Investors suffer as BSEC takes a long time to punish manipulators

A group of investors – through manipulation – increased Daffodil Computer’s share price by 74% from December 2018 to mid-2019 and it took the market regulator three years to prove their guilt and take punitive action against them.

On May 18 this year, the Bangladesh Securities and Exchange Commission (BSEC) fined Rezaur Rahman, Director of AIBL Capital Market Services, Tk3 lakh, Farida Hossein, client of UCB Stock Brokerage, Tk1 lakh and Maksuda Ahmed , client of One Securities, Tk2 lakh for manipulation.

Currently, Rezaur is the Managing Director of AIBL Capital Market Services, Maksuda is his wife, and Farida is his sister-in-law.

According to the BSEC charges, the three raised Daffodil Computer’s stock prices through a series of transactions and a false and misleading appearance of active trading between them, which constitutes a violation of securities laws.

The BSEC and the exchanges have state-of-the-art surveillance systems to monitor equity transactions to identify those who manipulate these means. This surveillance system was introduced after the market crash in 2010.

Despite the modern mechanism, the regulator could not abandon the practice of taking two years to complete an investigation and one year to issue a sentence.

A senior brokerage official said on condition of anonymity that the commission took a long time to punish the perpetrators. On top of that, the punishment is negligible compared to their crimes.

“Therefore, the influence of manipulators in the stock market has never diminished. Although a few investors make profits through manipulations, investors in general lose their capital. This disrupts the market order and makes the wary investors,” he added.

After the market crash in 1996, there was a demand to bring the perpetrators to justice. Although the culprits were identified in the investigation, the real culprits remained out of sight. And the process of punishing perpetrators has also been slow.

The same picture was seen after the market collapse in 2010. Although an investigation was carried out by the late Ibrahim Khaled, former deputy central bank governor, no action was taken in accordance with the recommendations. That is why the influence of traders in the country’s stock market is increasing.

From April to November 2021, the Delta Life Insurance share price increased by 274%. Earlier this year, the Dhaka Stock Exchange (DSE) investigated the reason for this unusual price increase. DSE has found evidence of the involvement of controversial investor Md Abul Khayer aka Hero and his associates.

The exchange also submitted its investigation report to the BSEC. Until the last update, the regulator had called Md Abul Khayer and his associates for a hearing.

Md Abul Khayer has been accused of manipulating Safko Spinning shares in 2021.

There are also allegations that this investor was behind the abnormal rise in the stock prices of insurance companies in 2020. Although many people suffered losses by investing in these companies, the main culprits n were not sanctioned.

A senior official of an asset management firm said the stock market was being manipulated daily by taking advantage of the BSEC’s procrastination in awarding sanctions. And for this reason, despite many initiatives, there is no discipline in this market. Instead, the BSEC is concerned about how to transact in the market and increase the index.

None of the BSEC officials agreed to comment on the matter. However, an official said on condition of anonymity that it was not easy to punish someone after putting them under the law. There are many steps to go through. In addition, due to a lack of manpower at the BSEC, the work cannot be done quickly.

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