BSEC Bhaban. COURTESY
The securities regulator has finally issued a set of rules, paving the way for creating a special fund to help revitalise the capital market. The much-awaited rules on the formation of the market stabilisation fund came into effect from June 27 last through a gazette notification.
Earlier, the Bangladesh Securities and Exchange Commission (BSEC) had decided to form a Tk 210 billion worth of 'Capital Market Stabilization Fund' in this regard.
"We hope operation of the fund will be started very soon," said BSEC chairman Prof. Shibli Rubayat Ul Islam.
Apart from supporting the market, the investors' long-pending claims of stock dividends and rights shares or un-refunded IPO (initial public offering) will be settled through the operation of the fund.
Under the supervision of a high-profile board of governors, direct sales and buy of listed securities will be conducted with the fund.
Besides, the market intermediaries will be able to get loans at a nominal interest rate from the fund.
Prof Shibli said the activities of forming the board of governors would start within a week.
To ensure depth to the market, a maximum 40 per cent of the cash balance of the fund may be used for direct buying and selling of the listed securities.
At least 50 per cent of the cash balance of the fund shall be used for providing loan to market intermediaries for refinancing as a margin loan.
The remaining 10 per cent of the cash balance may be used for investment in other securities such as fixed deposits and government securities, according to the investment ceiling as defined by the rules. The total fund worth Tk 210 billion will come from the undistributed or unsettled dividends namely cash, stock and rights.
As per the information of the securities regulator, 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.
According to 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.
If any cash dividend, which remains unpaid or unclaimed or unsettled or undistributed for a period of three 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 stipulated timeframe.
In the same way, the un-allotted or unsettled bonus shares and rights shares shall be transferred by the issuer in dematerialised form to the BO account of the fund.
The BSEC chairman said the fund will automatically be transferred from the listed companies to the account of the market stabilisation fund.
"Otherwise, the companies will face legal actions as a gazette notification has already been published on the rules of market stabilisation fund," he said.
On completion of due scrutiny, the investors' claims regarding dividends or un-refunded IPO fund will be settled within 15 working days of receiving of recommendation with intimation to the concerned issuer, according to the rules.
The board of governors of the fund shall be comprised of 11 members, including one 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 charted financial analysts as selected by the commission.
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