Bourses allowed to charge only Tk 6 lakh for issuing TREC

The Bangladesh Securities and Exchange Commission has drafted rules regarding the issuance of brokerage licence, saying that if anyone has Tk 3 crore in paid-up capital and pays Tk 6 lakh to the stock exchanges as fees would be eligible for the licence.

The stock exchanges will get Tk 1 lakh as licence fee and Tk 5 lakh as registration fee for issuing a TREC licence while the stock exchanges received Tk 25 lakh each on average for listing a company, Dhaka Stock Exchange officials said.

The brokerage licence is called Trading Right Entitlement Certificate which is a certificate issued by a stock exchange for execution of trading of listed securities as a broker or dealer as per securities laws.

The commission on March 25 sought public opinions on ‘BSEC (Trading Right Entitlement Certificate) Rules, 2020’ by April 15 despite the fact that the government declared public holidays for 10 days till April 4 to curb the spread of coronavirus in the country, the officials said.

In addition to having Tk 3 crore in paid-up capital, the applicant has to keep at all times Tk 2 crore as security money with the relevant stock exchange, the rules said.

The new TREC holder would not get back the security money if its licence is cancelled, it said.

It tagged a condition that the net asset value of the firm must be 75 per cent of its paid-up capital and directors of the company would not be a loan defaulter or would not have criminal case against them.

Complying with these conditions, anyone can trade clients’ shares worth of hundreds of crores of taka that has raised question about the effectiveness of the rules, market operators said.

They said that the draft rules did not focus on the company’s business experience, governance and financial capability to handle risks.

Besides, the BSEC ignored the DSE’s proposal of ‘auction system’ to find out the best bidders among applicants.

A number of DSE members said that seeking public opinions on such an important rules during a crisis period was irrational.

‘How can people give their opinions on the rules when the country is under a lockdown because of COVID-19,’ they questioned.

They also said that it would be risky to hand over trading licence to any such company which was financially weak and did not have enough assets.

The new board of directors of the DSE with the majority of independent directors had proposed the requirement of Tk 3 crore in paid-up capital, risking the investors’ funds while the previous board set the requirement at minimum Tk 10 crore.

There are 242 TREC holders at the DSE and some of them continue struggling in running their business.

On October 30 last year, the BSEC asked the DSE to confiscate licence of Shah Mohammad Sagir & Co after the brokerage house was charged with embezzling its clients’ money.

Since no other initiatives have helped victims get their money back, the licence will then be sold to compensate its victims.

Market experts said that the BSEC should approve auction system so that the bourse could pick up some of the best companies according to its need.

They also suggested that the licence fee and the registration fee should be higher than the proposed Tk 6 lakh.

The new TREC holder would pay Tk 1 lakh to the stock exchanges annually, the rules said. (Source: New Age)