The Bangladesh security and exchange commission was established on 8th June, 1993 as the regulator of the country’s capital market through enactment of the Securities and Exchange Commission Act 1993 through an amendment of the securities and exchange commission Act, 1993, on December 10, 2012, its name has been changed as Bangladesh securities and Exchange Commission from previous securities and exchange commission. The Commission consists of a chairman and four commissioners who are appointed for full time by the government for a period of four years and their appointment can be renewed only for further one term, but the condition is that age can not exceed 65 in position during the tenure. The chairman acts as the chief executive officer (CEO) of the commission. The commission has overall responsibility to formulate securities legislation and to administer as well. The commission is a statutory body and attached to the Ministry of Finance. It is headquarter located in Washington D. C and with nineteen officers.
Definition of SEC:
Securities and Exchange Commission is the regulator of the capital market, comprising Dhaka Stock Exchange (DSE) and Chittagong stock Exchange (CSE). It is also known as SEC. It is the primary federal regulatory agency for the securities industry, whose responsibility is to promote full disclosure and to protect investors against fraudulent and manipulative practices in the securities market. The Securities and Exchange Commission enforces, among other acts, the Securities Act of 1933, and the Securities Exchange Act of 1934, the trust Indenture Act of 1939, The Investment Company Act of 1940, and the Investment Advisers Act. The supervision of dealers is delegated to the self-regulatory bodies of the exchanges. The Securities and Exchange Commission is an independent, quasi-judiciary agency. It has five commissioners, each appointed for a five year that is staggered so that one new commissioner is being replaced every year. No more than three members of the commission can be of a single political party.
Generally most issues of securities offered in interstate commerce, through the mail or on the internet must be registered with the SEC.
Example: If someone purchases more than 5% of a company’s equity, he or she must report to the SEC within 10 days of the purchase because of the takeover threats it may cause.
Characteristics of SEC:
Major characteristics of Sec are given below:
- Statutory Body
- Has power of Investigation, Enforcement and prosecution
- Funded by the Government with provisi8on for self-financing
- Ensure proper issuance of securities
- Protect the interest of the investors in securities
- Promote development of the capital securities market.
- Regulate the capital and securities market.
Functions of SEC:
Securities and Exchange Commission performs the functions to arise and issuance of capital and financial instruments by public limited companies. The main functions of SEC are:
- Regulating the business of the stock Exchanges or any other securities market.
- Registering and regulating the business of stock-brokers, sub-brokers, share transfer agents, merchant bankers and managers of issues, trustee of trust deeds, register of an issue, underwriter’s portfolio managers, investment advisers and other intermediaries in the securities market.
- Registering, monitoring and regulating of collective investment scheme including all forms of mutual funds.
- Monitoring and regulating all authorized self-regulatory organizations in the securities market
- Prohibiting fraudulent and unfair trade practices relating to securities trading in any securities market.
- Promoting investors education and providing training for intermediaries of the securities market.
- Prohibiting insider trading in securities.
- Regulating the substantial acquisition of shares and takeover of companies.
- Undertaking investigation and inspection, inquiries and audit of any issuer or dealer of securities and any self-regulatory organization in the securities marker
- Conducting research and publishing information.
Departments and Principal Officers:
Spokesperson for the commission: Mr. Md. Saifur Rahman, Executive Director
Administrative & Finance (A&F) Department:
Administration and Finance department deals with human resources, all sorts of logistic activities, to carry ort day to day executive functions as well as finance and accounts. As part of Administrative functions, administration officials performed activities regarding correspondence with concerned ministries, recruitment & training of human resources, procurement, motor pool etc. In connection with financial activities, finance & accounts officials prepare budget and financial statement of the Commission, collect revenue & disburse payments, maintain Gratuity/Pension fund, General & Contributory Provident Fund etc. The department is headed by Mr. Farhad Ahmed, Executive Director.
Capital Issue Department (Initial Public Offering has been renamed):
Capital Issue Department of the Commission accords consent to issue equity and debt securities through initial public and also other than public offer. Public and private limited companies are required to take consent of the Commission for raising capital whose capital exceeds Tk. 10 million and 100 million respectively. This department also approves the issuance of listed companies’ rights share and repeat public offer. The department is headed by Mr. Md. Mahbubul Alam, Executive Director.
Capital Market Regulatory Reforms & Compliance (CMRRC):
CMRRC department drafts amendments of securities laws, suggests reforms of the market and provides clarifications. The department is headed by Ms. Ruksana Chowdhury, Executive Director
Central Depository System (CDS) Department:
Central Depository System (CDS) department supervises activities of Central Depository Bangladesh Limited (CDBL), activities of depository participants, dematerialization of listed companies’ shares under depository system, issue and transfer of securities in dematerialized form, beneficiary owners (BO) accounts, and issue order/notification etc. related to depository system, under the Depository Act, 1999, the Depository Regulation, 2000 and Depository (User) Regulation 2003. The department is headed by Mr. Md. Ashraful Islam, Executive Director.
Function of the department is to conduct commission Meeting and Coordination Meeting.
Corporate Finance Department (CFD):
The Corporate Finance Department (CFD) supervises and monitors the listed companies after issuance of primary shares in light of the securities laws. Activities of the department are oversight and reporting on issuers of listed securities related to on time submission of audited financial statements, half yearly financial statements and annual reports/minutes, examination of the aforesaid financial statements and reports/minutes, appointment of statutory auditors in compliance with securities laws, utilization of fund (IPO & Rights), compliance of conditions of notification regarding corporate governance, compliance of other securities laws, supervision and follow-up of the special audits conducted by the Commission, and review of existing securities laws, rules and regulations concerning CFD and proposed amendments thereto. The department is headed by Mr. Md. Anowarul Islam, Executive Director
Under the Securities laws, the Enforcement Department takes legal measures including imposition of penalty against those who breach/violate securities laws in consideration of nature of crimes they commit. Prior to taking measures, it follows due process that includes giving the accused an opportunity of being heard. All departments of the Commission send referral to Enforcement Department if they see any violation of securities laws. The department is headed by Mr. Farhad Ahmed, Executive Director.
International Affairs Department:
International Affairs Department (IAD) is responsible for the following activities;
- a) Maintaining relationship with all the capital market regulators of the world;
- b) Maintaining constant liaison with the International Organization of Securities Commissions (IOSCO), including all its Committees and Working Groups;
- c) All matters related to IOSCO Multilateral Memorandum of Understanding (MMoU).
Functions of Legal department are assisting the lawyers engaged by the Commission to conduct the cases filed by or against the Commission in different courts, preparing written objection and statement on cases filed against the Commission, preparing para wise comments on writ petition filed against the Commission, signing case related documents with affidavit before the concerned officer of the court, preparing plaint/requisition for certificate cases, filing certificate cases and conducting those to realize the penalty imposed by the Commission, vetting the letters, orders, directives sent from different departments of the Commission and providing legal opinion on different matters sent from different departments of the Commission. Ms. Ruksana Chowdhury, Executive Director, heads the department.
Management Information Systems (MIS) Department:
Functions of MIS department are development of automation for assisting different departments’ activities, development of capital market monitoring system based on computerized data analysis, informing all about securities laws and other related matters through its website www.secbd.org, planning, operating, administering and supporting IT infrastructure at SEC and assisting the Commission in related areas. The department is headed by Mr. Md. Ashraful Islam, Executive Director
Mutual Fund & Special Purpose Vehicle:
Mutual Fund & Special Purpose Vehicle Department deals with registration of mutual funds and special purpose vehicles, their monitoring, supervision and compliance, and any other function related to them. The department is headed by Mr. Md. Hasan Mahmud, Executive Director.
Registration & Licensing Department:
Registration Department looks after registration and renewal of all stock brokers, stock dealers, merchant bankers, credit rating agencies, depository participants, authorized representatives, asset management companies, trustees, custodians, and permission regarding branch opening of stock brokers. Licensing of intermediaries help the Commission to discharge its oversight functions more effectively. The department is headed by Mr. Mahbubul Alam, Executive Director
Research & Development (R&D) Department:
Research and Development Department of the Commission conducts investors’ education program twice a month for the general investors, organize capital market related presentation/seminar for various government and non-government organizations, deals with the Commission’s various publications like annual report (Bangla & English), quarterly report(Bangla & English), quartery Bangla news letter-Parikrama, furnishes various reports and information to the government and other institutions including Ministry of Finance and different regulatory authorities. The department is headed by Mr. Md. Ashraful Islam, Executive Director.
Supervision & Regulation of Markets and Issuer Companies (SRMIC):
SRMIC Department supervises stock exchanges and deals with complaints lodged against issuer companies as per securities laws. The functions include monitoring of declaration about sale/purchase/transfer of securities by the sponsor /director of the listed companies, monitoring of monthly shareholding position of sponsors/directors, monitoring of disclosure of price sensitive information of listed companies, approval of transfer of shares of listed companies outside the stock exchange, monitoring all activities of stock exchanges (except securities transactions), taking effective measure to address complaints against issuer, monitoring of AGMs/EGMs and dividend payments for all listed companies. The department is headed by Mr. Md. Anowarul Islam, Executive Director
Supervision & Regulation of Intermediaries (SRI) Department:
Function of SRI Department is supervision of performing activities of merchant bankers, stock dealers/stock brokers, depository participants, security custodian banks, merchant bankers, security lenders & borrowers and other market intermediaries. SRI department is headed by Mr. Md. Saifur Rahman, Executive Director
Surveillance Department keeps vigil on securities transactions in Bangladesh. To identify unlawful trading activities, surveillance department watch and analyze the trading in both the stock exchanges through on-line and off-line surveillance system and prepare daily, weekly & monthly trade reports at the end of trading by pointing market condition and observation of surveillance officials. In order to ensure proper compliance of securities related laws, surveillance department conducts investigation and enquiry against involving parties regarding market manipulation, insider trading & other malpractices, if any. The main purpose of the said activities are to ensure fair-trading and build-up confidence of investors in the securities market. The department is headed by Mr. Md. Saifur Rahman, Executive Director
Some Important Securities related laws:
|12 January 2014||Check List for Appointment of Independent Director|
|24 October 2013||Circular Regarding listed Companies AGM. Dated:24 Oct 2013|
|26 September 2013||Regarding Order to suspend Rule 3(5) of the Margin Rules, 1999|
|21 July 2013||Amendment of Coporate Governance Guidelines Gazette|
|10 April 2013||Suspension of rule 3(5) of Margin Rules, 1999|
|27 February 2013||Directive: Regarding Unrealized Loss Provision by the stock Broker/Merchant Banker|
|10 December 2012||Securities and Exchange Commission (Amendment) Act, 2012 (Bangla)|
|23 October 2012||Valuer List|
|30 September 2012||Directive: Regarding Margin Ratio by the Merchant Banker|
|03 September 2012||Revised Corporate Governance Guidelines|
|12 March 2012||Amendment to the Securities and Exchange Commission (Issue of Capital) Rules, 2001|
|23 February 2012||Order regarding Mutual Fund|
|23 November 2011||Steps Taken for Stabilizing Capital Market|
|2 November 2011||Amendment to the Securities and Exchange Commission (Rights Issue) Rules, 2006|
|26 October 2011||Notification regarding Book Building Method|
|21 September 2011||Order related to sell of shares of Sponsors/Directors/5% and above shareholders.|
|15 September 2011||Order related to Uniform face value of shares of Tk. 10 each.|
|24 August 2011||Notification regarding the insurance companies|
|27 July 2011||Order related to issue of capital or public offer of securities|
|28 March 1011||Advisory Committee|
|14 November 2010||Notification related to the consent of issue of capital|
|10 October 2010||Amendment to Stock Broker, Stock Dealer and Authorized Representative Rules 2000|
|06 September 2010||Directive related to netting and NAV calculation and margin call|
|27 July 2010||Notification related to substantial acquisition of shares|
|22 July 2010||Directive to stock brokers related to single client exposure limit|
|30 June 2010||Notification related to annual BO accounts maintenance fee|
|16 June 2010||Notification on amendment of OTC Market Rules related to definition of unlisted securities|
|10 May 2010||Notification related to 10 taka phase value of share|
|05 May 2010||Time Extension of ICB Mutual Funds|
|04 May 2010||Notification related to record date and AGM|
|18 April 2010||Letter to Bangladesh Bank about MICR|
|11 March 2010||Notification related to mutual fund lock-in.|
|18 February 2010||Directive to GP & Marico related to trade in spot market|
|10 February 2010||Directive related to CSE listing regulation about financial statement upload on company website|
|07 December 2009||Related to depository fee year— July-June instead of January-December|
|17 November 2009||Amendment of Credit Rating Companies Rules 1996|
|26 October 2009||Directive to DSE, CSE about Aftab Automobiles Ltd related to margin rules|
|26 October 2009||Directive to DSE, CSE about all listed MFs related to margin loan|
|21 October 2009||Directive to DSE, CSE about 28 listed securities related to margin loan|
|21 October 2009||Directive to DSE, CSE related to stock broker branch opening|
|20 October 2009||Directive to DSE, CSE related to transaction of physical shares|
|20 October 2009||Directive to DSE, CSE not to consider non-dematted securities as marginable|
|01 October 2009||Directive to DSE and CSE|
|06 September 2009||Directive related to OTC market in DSE|
|09 July 2009||Conditions under 2CC to the issue of capital|
|02 July 2009||Amendment of Capital Issue Rules, 2001|
|27 May 2009||Directive on branch opening for stock broker|
|11 March 2009||Notification on book building method|
|16 May 2007||Amendment of Depository User Regulations 2003|
|03 July 2006||Order related to ‘N’ category|
|09 Jan 2006||Order related to corporate governance|
The SE tries to make sure that all public companies provide accurate information sot that investors can make educated decisions. While large scale cases of fraud occur from time to time, the SEC, by and large, is there to protect individual investors. By maintaining accurate records, inspecting company reports and keeping a watchful eye over market activity, the SEC acts as a police force, a lawmaker and sometimes even a court for the securities market.
The stock market is one of the most important sources for companies to raise money. There are two stock markets in Bangladesh. Between them one, is named Dhaka Stock Exchange (DSE) in Dhaka, Dhaka Stock Exchange (DSE) in Dhaka. Dhaka Stock Exchange dates back to 1952 when the local government deemed it necessary to establish Stock Exchange because Pakistani shares and securities were prohibited from being bought or sold on the Calcutta Stock Exchange, up until this point, Pakistan had been trading quite profitable on the CSE and had no need to establish their own Stock Exchange department. In response to the prohibition the provincial Industrial Advisory Council made the decision to establish a Stock Exchange in Eastern Pakistan. Initially it was suggested that instead of creating an independent Stock Exchange, a branch of the Karachi Stock Exchange be opened at Dhaka. However this proposal was very unpopular with representatives from East Pakistan who felt that it was necessary to create a completely new Stock Exchange in Dhaka. This is what eventually happened with different members of the stock exchange purchasing memberships cards at the price of RS. 2000. There are two proposed Stock Exchange. The response was overwhelming and on the 7th of July 1953 a meeting was held with roughly 100 interested persons attending of these, eight men were selected to promote the Stock Exchange the DSE was officially formed shortly afterwards. The DSE was moved to its current location in 1959.
Formation of DSC:
The Dhaka Stock Exchange (DSE) is registered as a Public Limited Company and its activities are regulated by its Articles of Association rules & regulations and by-laws along with the Securities and Exchange Ordinance – 1969, Companies Act – 1994 & Securities & Exchange Commission Act – 1993. The issued capital of this company is each pricing Tk. 500000 which is divided up to 250 shares each pricing Tk. 2000. No individual or firm can buy more than one share. According to stock market rule only members can participates in the floor and can buy shares for himself or his clients. At present it was 238 members. Market capitalization of the Dhaka Stock Exchanged reached nearly $9 billion in September 2007and $ 27.4 billion on Dec 9, 2009.
The number of listed companies in DSE are 378 of which are shares, eleven debenture, and 9 mutual funds.
- To provide the information of a full range of investment products-including stocks, bonds, mutual funds, and CDs available in Dhaka Stock Exchange.
- To provide investment advisory and financial planning information-including sales, research, underwriting and trading for individuals and institution.
As per Article 105B, the management is totally separated from the Council. A highly qualified and trained professional Management Team is running Day to day operations and the Chief Executive Officer is the head of Management Team of the Exchange. The Management team runs independently under policies set by the Board of Directors. Other members are the Secretary, Financial controller and IT-Director.
Categories of Dhaka Stock Exchange Companies:
Companies which are regular in holding the annual general meetings and have declared dividend at the rate of ten percent or more in the last English calendar year.
Companies which are regular in holding the annual general meetings but have failed to declare dividend at least at the rate of ten percent in the last English calendar year.
Newly listed companies except green-field companies which shall be transferred to other categories in accordance with their first dividend declaration and respective compliance after listing of their shares.
Companies which have failed to hold the annual general meeting when due or have failed to declare any dividend based on annual performance or which are not in operation continuously for more than six months or whose accumulated loss after adjustment of revenue reserve, if any, exceeds its paid up capital.
Functions of DSE
The Major functions are as follows:
- Listing of companies.
- Providing the market place for trading of listed securities, settlement of trading.
- Publication of daily index and Monthly Review etc.
- Monitoring the activities of listed Companies.
- Listing of Companies.(As per Listing Regulations)
- Providing the screen based automated trading of listed Securities.
- Settlement of trading.(As per Settlement of Transaction Regulations)
- Gifting of share / granting approval to the transaction/transfer of share outside the trading system of the exchange (As per Listing Regulations 42)
- Market Administration & Control.
- Market Surveillance.
- Publication of Monthly Review.
- Monitoring the activities of listed companies. (As per Listing Regulations).
- Investor’s grievance Cell (Disposal of complaint bye laws 1997).
- Investors Protection Fund (As per investor protection fund Regulations 1999)
- Announcement of Price sensitive or other information about listed companies through online.
- The Clearing and Settlement module provides the management of trade from the point of entry into the Settlement Pool trade database until it has been delivered and settled and removed from the Settlement Pool. It consists of three major business processes.
Divisions & Departments and their Activities:
Dhaka Stock Exchange Ltd. (DSE) is a very reputed and important organization in the financial sector of Bangladesh. It is being proved to be an excellent enterprise for-
Being action oriented
Promoting managerial autonomy and entrepreneurship
Paying close attention to the needs of officers and employees.
Having a simple organization structure
The head of every department is charged with the responsibility to take the necessary actions to make it possible for each officer and employee to contribute to his best to the performance of the group or department, which ultimately will lead to the fulfillment of corporate goal- the efficient operation of the securities market of the country.
At present DSE Performs its functions through four divisions with 26 departments. The divisions are:
- Administration Division
- Operation Division
- Finance Division
- Information and Communication Division.
The Administration Division of DSE runs with the goal of providing possible assistance to all other departments in their smooth operation. The number of member firms in DSE has been increased from 195 to 230 in recent days. The Administration Division is involved in all day affairs administrative activities and all works of the CEO’s Secretariat. This department also arranges training programs offered by DSE and SEC.
The Executive in each part will report to respective Senior Executive and each Senior Executive will report to Manager. Manager will be responsible to AGM, AGM; will be responsible to DGM, Admin and DGM; Admin will finally be responsible to CEO through GM, Admin. The Departments of this Division are:
- Membership Affairs
- Board Affairs
- HRM, Admin & Training Affairs
- Logistic, Maintenance & Protocol Department
- Research, Development &Information
- Publication Department
- Public Relation Department
- Security Department
- DSET raining Academy
- Personal office in CEO.
Functions of Membership Affairs:
- Registration of every DSE Broker/Dealer under the Membership regulation of Security Exchange commission (SEC).
- Completion of regulatory formalities regarding the transfer of existing membership (share).
- Yearly renewal of registration of all membership from SEC.
- Competition of all formalities regarding the registration of new members by SEC.
- Collection and preservation of yearly audited Balance Sheets of member houses and submission of one copy to SEC.
- Completion of all formalities regarding the registration of new/fresh authorizes and sending to SEC for registration.
- Renewal of registration of existing authorized representatives from SEC
- Registration of authorized switched off from one member house to another.
- Maintenance of updated information regarding all the members through Database
- Maintenance of all member files and all letters, documents, etc. related to members.
- Communication with members for members for training provided by DSE
Functions of Board Affairs:
- Contact with the CEO and Board of Directors and set up the schedule of Board meeting
- Preparation of minutes of the Board meetings and Committee meetings and get those minutes signed by the CEO and Board of Directors
- Communication with Securities and Exchange Commission regarding the decisions of the Board as per requirement of the Board and SEC.
- Preparation and maintenance of all documents relating to Board meeting and Committee meeting.
- Forwarding of letters, documents, etc. to SEC, Member firms and other institutions.
- Receiving and filling of all documents, letters, etc. from SEC, member firms and other institutions.
- Issuance of departmental circular, IT announcement, etc.
- Coordination of all activities relating to the maintenance of Investor’s protection fund
- Any other action as required by CEO.
Functions of HRM, Admin & Training Affairs:
- Filling and keeping filed positions in the organization structure.
- Identification of job requirements and selection, recruitment, placing and planning the careers of existing and new officers’ employees in accordance with job requirements.
- Provision of training and otherwise development of both candidates and current job holders so that they can perform tasks effectively and efficiently.
- Continues checkup of attendance and leave status of officers and employees and reporting to the CEO.
- Submission of Annual Confidential Report (ACR) of all employees to the CEO.
- Maintenance of updated information regarding all officers and employees.
Training Programs on different Grounds are arranged here, likely;
- Authorized Representative Training.
- New Member Training.
- New Authorized Representative Training.
- Investors awareness Training.
- DSE Employee Training (Local & Foreign)
- Automated Clearing & Settlement Training.
Moreover, additional training programs are arranged if any inclusion in the Capital Market.
Logistic, Maintenance & Protocol Department:
Logistic, Maintenance and Protocol Department of DSE is involved in providing all types of logistic and protocol services as per requirement.
- Collections of member’s dues.
- Preparation of bills for listing fees.
- Collection of listing fees.
- Follow up of listing fees realization and receivables from listed companies.
- Maintenance of liaison with banks.
- Dealing with important matters and L/C when necessary.
- Net capital balance collection from members and reporting to SEC.
- Any other duties as and when required.
- Insurance of members and DSE staff.
- Supervision sends assurance of the logistic and supply chain of DSE.
- Procurement/purchase of logistic items to run smoothly.
- Monitoring the responsibilities of logistic support units.
Functions of Maintenance:
- Maintenance 0f 1250 KVA substation (1250 KVA transformer, 11 KV H.T switch gear, 2000 ALT 400 Emergency control panel).
- Maintenance of 250 KVA & 30 KVA generators.
- Maintenance voltage stabilizer of IT main server & lift power supply.
- Maintenance of lift.
- Maintenance of Photocopier.
- Maintenance of power distribution at all the floors in 9/E and 9/F, DSE.
- Maintenance of the PABX system.
- Maintenance of air cooler of DSE office.
- Taking care of all office, toilet & lighting of 12 floors in DSE.
- Maintenance of all types of electrical applications and supervision of related activities.
- Maintenance of pump (water supply).
Research, Development & Information Department
The Research & Library Department is concerned with providing assistance to all types of research work and supervising the DSE library.
Functions of Research, Development & Information Department:
- Preparing database for all listed companies.
- Supporting to teachers and students in their research works and projects by providing necessary data listed companies.
- Distribution of required information to members and investors to meet up their quarries regarding listed companies, any regulation, etc.
- Inform the listing department of any announcement regarding company degradation, share addition, etc. which the listing Department sends to IT for announcement.
- Provision of data and information for publication & Public Relation Department for any publication of DSE like Monthly review, Annual report, Profile, Diary, etc.
- Submission of monthly data regarding market trade to SEC.
- Regular provision of data to SEC as per requirement.
Preparation and printing of –
- Monthly review (with half yearly).
- Annual report.
- DSE Profile.
- Members Directory.
- Company Directory.
- All gazette notification published by BG press.
- Supervision of Paper citing.
- Co-ordination with Press and Electronic Media.
- Conduct the Media and others meeting.
- Press release and other related issues.
- Maintenance of all kinds of information
There is another important section is Security Section. Executive, Security supervisor, Assistant security supervisor and some guards are working there.
Functions of Security Department:
- Preparing roster of duties for all the security guards of DSE and Security Company.
- Regular checkup of arrangements for physical security to ensure a satisfactory security system.
- Arrangement of security protection for VIP, VVIP and foreign? Dignitaries visiting DSE.
- Surprise check of security by day and night for strict maintenance of the security system.
- Continuous co-operation and communication with police department and other law enforcement agencies.
Finance Division deals with all activities relating to the preparation & maintenance of general accounts and clearing accounts and for assistance to the Deputy Financial controller in the budgetary control of DSE. The Departments of Finance Division are:
- General Account Department
- Clearing Account Department
- DSE Full Service DP
- Clearing House (Share)
Function of General Accounts:
- Preparation and maintenance of books of accounts (Journal Entries, Ledger Books, Cash Books, Income & Expenditure Accounts, Balance Sheet & Cash flow Statement.)
- Preparation of monthly Financial Statement.
- Preparation of salary payroll.
- Bank reconciliation.
- Controlling of all software/ Database relating to general accounts, Petty Cash, Clearing, Salary and Members Bill.
- Scheduling of all expenses.
- Preparation of all kinds of payment note.
- Maintenance of asset register.
- Submission of early financial statement to SEC.
- Maintenance of member accounts and Provision of accounting data for members about their own accounts as per requirement.
Clearing Account Department:
Clearing Accounts is concerned with the monitoring and verification of clearing accounts related activities. The main function of clearing accounts is:
- Margin Settlement
- Data collection and processing and preparation of statements.
- Collection and disbursement of payments.
- Demoted spot trade settlement.
- EX DP
- Preparation & Accounts.
Function of Clearing house Department:
- Reception, reconciliation and delivery of shares to member houses everyday.
- Assurance of share settlement and clearing in time.
- Settlement of margin
- Taking necessary actions in case of violation of margin rule by member firms.
- Preparation of list of defaulter members and adoption of necessary actions against the defaulters.
- Preservation of DSE share volt.
- Communication with listed companies as and when requires.
DISPUTED, ODD LOT, BLOCK SHARES & SPOT TRADE:
- Verification of disputed share (fake, reported, lost, stolen) settlement and correspondence with listed companies and member firms in this regard.
- Supervision of receiving and delivery of good shares against any defective share.
- Arrangement of receiving and delivery of odd lot shares and block shares.
- Settlement of spot transaction of physical shares.
- Settlement of spot transaction of CDBL shares.
- In case of default in settlement of spot transaction of physical shares and CDBL shares, proper reporting for the suspension of defaulter member.
- Settlement of bonus, dividend and other benefits on demate shares not transferred into CDBL for unavoidable circumstances.
- Assurance of share settlement and clearing in time.
- Preparation of defaulter list.
- Preparation of selling out and buying in list of shares.
- Communication with listed companies as per requirement.
DSE FULL SERVICE DP
DSE DP provides DP services to brokers and dealers who are trading participants that is who cannot provide DP services to their clients.
DEMATE / REMATE ACTIVITIES
Completion of all activities relating to the conversion of shares from physical to electronic from (Demote) or electronic to physical form (Remote)
- Verifications and receiving of physical share in order to demote shares.
- Entrance of shares off line.
- Upload of shares on line.
- Checkup of demote confirmation.
- Checkup of demote pending status, collection of pending shares and re-entry of rejected physical shares.
- Verification of demote share in order to remote shares.
- Entrance of shares off line.
- Upload of shares online.
- Checkup of remote confirmation.
BO ACCOUNTS SERVICES
- Opening of BO Accounts for beneficiary owners account holders refereed by trading participants.
- Providing services to beneficiary owners in time.
- Reception of pay in form, verification of signature of BO and existence of shares.
- Pay in set up of shares off line and upload online.
- Reception of pay out from members, verification of signature and the existence of shares.
- Approval of pay out by another person and upload online.
- Liaison with issuer to solve the demate problem.
- Liaison with BO account holders and answer their quarries.
- Liaison with CEO and other departments.
- Liaison with CDBL.
(C). OPERATION DIVISON:
- Surveillance Department
- Monitoring, Investigation & Compliance Department
- Legal Affairs
- Listing Department
- Market Operations
- Internal Audit & Compliance.
Listing & Market Operation
IPO Related Functions
- Processing and evaluation of the draft prospectus of IPO.
- Evaluation of Financial Statements of new companies to be listed and preparation of the IPO comments for Securities and Exchange Commission.
Listed Company Related Functions
- To communicate with all the listed companies regarding the compliance of relevant rules and regulation.
- Assurance of timely disbursement of corporate announcement.
- Monitoring of listed companies for the compliance of listing Regulations, Company Law and other relevant rules.
- Announcement of half yearly and yearly performance of listed companies through the trading system.
- Evaluation of performance of listed companies and update listed company records.
- Processing of approval for transfer of share outside the trading system.
- Processing and recording of all types of transfer / sale or buy of shares of Sponsors/Directors.
- Processing of application of gifting of shares as well as transfer of shares in special circumstances.
- Taking subsequent action for corporate announcement as per rules and regulation.
- Adoption of all necessary actions required for Book Closure/Record Date and other corporate benefits.
- Trade suspension or trade halt age of listed companies and members also during the trading hour considering the necessity of market operations.
- Protection of investor’s interest in the listed companies when any anomaly is observed in DSE.
Monitoring, Investigation & Compliance Department
Monitoring and Investigation Department assists in smooth functioning of capital market. The objective of this department is to inspect, monitor and have feedback on the member houses according to securities rules and regulations and settle dispute between investors and member houses, provide support to settle claims, monitor other activities of the exchange like activities of DSE DP regarding pay in/ pay out and other legal matters of the exchange.
Activities of Monitoring, Investigation & Compliance department:
The main functional areas of the department are:
- Legal & Compliance
- TWS set up monitoring
- Room verification
- DP- monitoring
- Any other monitoring ordered by CEO regarding violations of Securities
- rules by any listed company with DSE or any brokerage house.
- Company Monitoring ordered by SEC any directed by CEO.
Procedure of general monitoring:
General Observation (General documents related with share trading):
- Account opening Form
- Buy Sale order Slip
- Trade confirmation Statement
- Buy/Sale order register
- Money receipt
- Payment Voucher
- Share receive and Delivery certificate
- Broker/dealer license
- Authorize registration certificate
- Client ledger.
- Stock report.
- Bank Account Statement.
- Net Capital Balance position.
- Deed of Margin Agreement between member and investor (if possible).
- Compliance report.
- Compliant register.
Special observation (Monitoring House Activities as Depository participant):
- BO account opening for
- Pay in slip
- Pay out slip
- BO stock report
- Find discrepancies and variability of houses activities and generating report.
- Inform the concern house about their deficiencies.
- Aware them about securities rules and provide feedback to the house to overcome deficiencies regarding any lapse in operating house activities and also try to re from them in order to rules and regulations.
- Final report submits to the Securities and Exchange Commission about house status. Monitoring department monitors the activities of at least 5 brokerage houses in each Calendar month.
Monitoring Department conducts special monitoring in brokerage houses according to SEC order through their inspection report. The procedure is same as general monitoring. The department conducts some other monitoring from time to time. They are as follows:
- TWS set up monitoring: Monitoring department inspect the set up of TWS according to TWS installation and user manual.
- Room verification: Monitoring department inspect brokerage house office premises whether they are properly decorated and suitable for business.
- DP – Monitoring: Monitoring Department inspect DP activities of the brokerage house regarding their pay in, pay out, and other activities as DP.
One of the main responsibilities of Monitoring Department is to ensure compliance with Securities and Exchange rules and investigate any fraudulent activities in respect of securities market operations.
This department assists DSE in various legal matters such as
- Correspondence with outside solicitors if any litigation arise against DSE.
- Assists in any other legal matters of DSE.
- Settlement of dispute that arises out by death of members or un settled claim by the member.
- Arrangement of hearing between appellant accused member house and settlement of any undue claim against the house.
Another important department of Dhaka Stock Exchange is Surveillance Department.
Its functions broadly describe in under below:
Functions of Surveillance Department:
- PRICE MONITORING
On line Surveillance:
For detecting potential market abuses at a nascent stage to reduce ability of the market participants to unduly influence the price & volume of the scripts traded at DSE by accessing into orders & trades of members.
Off-Line Surveillance: Monitoring of
- High/Low difference in prices.
- Percentage change in prices over a week/fortnight/month.
- Top N scrip by Turnover a week/Fortnight/month.
- Trading in infrequently traded scrip.
- Scrip’s hitting new high/low price, etc.
Conducting in-depth investigations based preliminary enquiries/analysis of trading of the scrip. In Case of irregularities observed, necessary actions are initiated or investigation case is forwarded to SEC through the CEO, if necessary.
- Warning to member – verbal/written to members through the CEO are issued when market irregularities in the scrip are suspected
- Impositions of penalty/suspension – penalize or suspend the members through the CEO who are involved in market irregularities, based on the input/evidence available from investigation report.
- Liaising with Compliance Officers of companies to obtain comments of the company on various price sensitive corporate news items appearing in selected News Papers.
- Comments received from the companies are disseminated to the market by way of online news bulletin.
- Investigations based on rumor verifications are carried out, if required, to detect cases of suspected insider trading
- POSITION MONITORING:
The Surveillance Department closely monitors outstanding exposure of members on a daily basis. For this purpose, it observes various off-line market monitoring reports. The reports are scrutinized to ascertain whether there is excessive purchase or sale position build up compared to the normal business of the member, whether there are concentrated purchases or sales, whether the purchases have been made by inactive or financially weak members and even the quality of scrip’s is considered to assess quality of exposure. The following key areas are examined to assess the market risk involved –
Online Monitoring of Broker Position
Surveillance closely monitors broker’s gross turnover exposure for ensuring margin calls in time
- B/S Statement of Trading Members
- Concentrated B/S
- B/S of scrip having thin trading
- Verification of Institutional Trade
- Verification of Foreign Trade
- Verification of Cross Reporting Trade
- Verification of D Form Trades
- Verification of Sponsor’s Trade
- Snap Investigation
- Market Intelligence
- Review block Trades
- Review List of Settlement Failures
- Verification of Company Accounts
- Review of Media Information
- Monitoring on newly Listed Stock
- Development of Good Liaison
- Development of market contacts & to picking up Intelligence.
- Preparation of daily market report to reflect the state of the market & share prices at a specified time & distribution to the CEO.
- Submission of routine weekly report of market monitoring of Surveillance Department to the Commission.
- Submission of routine weekly report of foreign trades to Commission.
- Off & on inspection to member firms, preparation of reports thereof & forwarding to the CEO.
- Instant reporting to the CEO following his instruction.
- Reporting to the Commission following their enquiry in particular area of brokers/scrapes.
- Any other activities as & when directed by the CEO.
Internal audit & Compliance
- Identification of irregularities in any payment or lapse of any documents.
- Random check up of DSE store to find our irregularities.
- Regular check up of petty cash.
- Identification of over expenses from petty cash.
- Supervision and examination of entrance of income in DSE Accounts.
- Submission of weekly or monthly report on petty cash account to CEO.
- Any other action as per requirement.
(D). INFORMATION & COMMUNICATION TECHNOLOGY DIVISION:
- System & Market Administration Development
- Network Department
- Web Development Department
- MIS & Development Department
- Back Office Department
- Application Support Department.
Membership Affairs (M/A) Department
Department of Membership Affairs is one of the most important departments in Dhaka Stock Exchange Limited. This department of DSE runs with the goal of providing possible assistance to all the DSE Member Companies in their smooth operation. In the year 2006 the total number of active DSE Member Companies was 120 with a few branch offices. But in the year 2009 the number of active DSE Member Companies has come to 285 with 500 Branch Offices (on October 2009 existing 381 and proposed 120) and the total number of Authorized Representatives has reached to 2475(on October 2009 existing 1692 and applied 525). As a result of such expansion and up gradation of DSE, the activities related to membership affairs increased by a considerable degree.
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Management of Membership Affairs Department
The overall activities of Membership Affairs Department of DSE is fully charged and controlled by the Chief Operating Officer (COO).This department is responsible of dealing with the DSE members issues. Specially, this department play vital role to meet some basic immediate needs. This department also execute some fundamental works of others department. Hierarchy of the department is given below:
Contribution of the M/A Department
The membership Affairs Department provides various assistances to the members to operate efficient transaction of Stock Exchange. The Membership affairs department contributes in following work –
- Registration of Stock broker and Stock Dealer.
- Opening new Branch
- Approval of the existing branch.
- Approval of the extension branch office.
- Authorize representative Appointment.
- Withdrawal of the authorized representative.
- Renewal of the authorized representative certificate.
- Issuing stock broker and stock Dealer certificate.
- Renewal of stock broker and stock Dealer certificate.
- Issuing of trading work Station.
- Miscellaneous members related works.
This department focuses on collecting necessary document and after sorting all the document, complete set of the document go to due authority for final approval. Complying Rules and regulation the department arrange document for final approval. The department always remains alert to fulfill DSE member’s requirement.
Functions of M/A Department
Registration of every DSE Broker/Dealer:
Membership of DSE facilitates a person prospects to be a Trading members (Stock Brokers) of the Exchange through compliance of the regulatory Provisions of DSE and SEC. There are 238 members in DSE all of whom are corporate bodies.
The eligibility criteria for the membership according to Regulations, 2000 of SEC are as follows:
- A corporate body with a minimum paid up capital of BDT 2.5 million.
- Any partner or director thereof as the case can not be
- Less than 21 years old
- A bankrupt announced by CIB of Bangladesh Bank
- Person of unsound mind
- A member of any Stock Exchange
- Person convicted by a competent court of an office involving moral turpitude or any misconduct
- A Merchant Banker , Portfolio manager, trusty of Mutual Fund
- A person of insolvent by court. etc
Guidelines to Overcome the Problems of Stock Market
The following guidelines may be helpful to boost up the stock market in Bangladesh.
- Set up training center for the newly investors in the share market to reduce the risk of the capital market.
- To make the rule easy for paying the income tax.
- Influence the foreign investors by proving the extra facility.
- To make the market easy for product marketing.
- To make the market active by marketing the industry strong.
- To provide training for the present as well as potential entrepreneurs.
- Strengthening the Securities and Exchange Commission.
- To make the easy rule for the establishment of the industry to increase the rolling of capital market.
- To make rule so that high quality securities are bound to come to stock market.
- To provide tax benefit of the listed companies in order to encourage none listed companies to be listed with the stock exchange.
Vision of Future
- Bringing securities under Central Depository System within two years,
- Enhancing bond market through bringing in government and municipal bonds beside the corporate bond.
- Internet based trading creating provisions for investment from any where in the world,
- Enhancing greater degree of transparency in financial discloser for better corporate governance.
- Initiating the process of-creating derivative and future market.
- Making the market competitive from regional securities market perspective through ensuring market friendly rules and regulatory framework.
The role of Dhaka Stock Exchange Limited has been remarkable in recent rears. It has gained the confidence of public and is able to attack more and more funds. At the end of the last decade what was impossible has now become possible and any company listed with Dhaka Stock Exchange can expect to raise sufficient funds through it.
The Dhaka Stock Exchange has been able to attract a sufficient volume of foreign funds and the number of foreign investors is growing day by day. If this trend continues Dhaka Stock Exchange market will be efficient one in the near future. at the end of the year 2010 Dhaka Stock Exchange is expected to become one of the major stock market in this region.
So far we have observed that Dhaka Stock Exchange has suffered from ups and downs and it can be attributed to the efficiency of the members and some of the consistent policies of the government with more experience. In the coming year in dealing with such busy capital market both the Dhaka Stock Exchange members and government policy makers are expected to be more consistent in their practices and policies. Their product role in the future will certainly be a major factor in the performance of Dhaka Stock Exchange.
Chittagong Stock Exchange (CSE) is the second stock exchange of the country was established on 12 February, 1995. Being a modern stock exchange, after it’s setting up in Agrabad commercial area of the port city, CSE has infused many new and innovative ideas for the development of share market. A policy making committee having 18 members including 12 elected from in general members runs CSE. The Security and Exchange Commission select other seek members. The members of the committee elect the President and 3 vice-president of CSE. The committee runs the excvhage4r following the Security Act 1920, the Security Ordinance 1967, the Security and Exchange Commission Act 1993, the CSE automatic Transection regulation 1999, The Chittagong Stock Exchange investor Protection fund Regulation 1999, The Margin Rules 1999. CSE introduce a fully automated transaction program from June of 1999. At the outset, the number of CSE’s scheduled securities was 13, which was raised to 243.
Formation of CSE:
CSE which is one of the two stock markets that control the share business of Bangladesh. Founder members of the proposed Chittagong Stock Exchange approached the Bangladesh Government in January 1995 and obtained the permission of the Securities and Exchange Commission on February 12, 1995 for establishing the country’s second stock exchange. The Exchange comprised of twelve Board members, presided by Mr. Amir Khosru Mahmud Chowdhury (MP) and run by an independent secretariat from the very first day of its inception.
CSE was formally opened by then Hon’ble Prime Minister of Bangladesh on November 4, 1995.
Foresight of Chittagong Stock Exchange: Any organization is founded with a vision, with a foresight. Chittagong Stock Exchange also has some vision. But there is one with a great aspect of the development of the commercial side of Bangladesh. Taking the securities and financial products to new height is the foremost vision of Chittagong Stock Exchange. That means that by improving the current position of CSE, the stock business will be much improved and developed. The financial properties of Bangladesh will be introduced to the new system of excellence.
Core Values of CSE: Every person has the right to trade with Chittagong Stock Exchange. This is one of the core values of CSE. Forbidding transparency is also a criteria of core value about this stock market. Trading with excellence is very much inspirable for CSE. Maintaining the harmony of trading is a supportive way of valuing core in CSE. Again the commitment must be kept under the prominence of the stock market. Integrity has to be controlled by theChittagong Stock Exchange. These core values have added an extra function in CSE.
Objectives of Chittagong Stock Exchange:
Every organization has some objectives. Chittagong Stock Exchange also keeps their own objectives. They are given below……..
1. The first objective is to enhance the business turnover.
2. With the development of technology, Chittagong Stock Exchange wants to modernize their trading system.
3. CSE is also working for ensuring relationship of the management structure.
4. Chittagong Stock Exchange is trying heart and soul to achieve the highest level of career opportunities and professionalism. It is creating the confidence area for share-holders.
5. The stock market is engaging the product visions and market diversification. It allows you to taste the new level of share market. A trader can get a chance to access any product or share with simple procedure.
6. Chittagong Stock Exchange is working for contributing to the capital market policy improvement. This will lead the economic stats of this country to a new dimension.
7. A service which is related to exchange possibly the best chance about Chittagong Stock Exchange.
Legal Basis of CSE:
- As legal entity CSE is a not-for-profit public limited company. All of its 148 members are corporate bodies. It has a separate secretariat independent of policymaking Board. The Board comprises of brokers and non-brokers directors with equal proportion to ensure the transparency.
The Board constituted Committees to delegate such functions and authority as it may deem fit. There is an independent secretariat headed by a full time Chief Executive Officer. CSE activities are regulated by its own regulations and bye laws along with the rules, orders and notification of the BSEC.
Regulatory Structure Overview:
The Managing Director is responsible for implementing the decisions of the Board, the day to day running of the exchange and formulating strategic plans for agreement with the board.
Following are the functions of the Managing Director and the various Departments of CSE:
Systems: The Systems Department carries out the following functions:
- Deal with user queries
- Manage communication network
- Manage information technology developments and suppliers
- Manage internal information technology awareness
- Manage trading and operate Clearing & Settlement System
- Maintain master file
- Print daily reports and produce statistics
- Support internal users and setup and train new system users
Clearing, Settlement & Dp: This department is responsible for:
- Ensuring exchange clearing and settlement activities through clearing house
- Handling settlement failure
- Handling auction settlement
- Monitor foreign trade settlement
- Monitor OTC trade settlement
- Maintenance of members margin
- Provide depository related services
Market Operations: This department carries out the following functions:
- Monitor public information
- Monitor, receive and disseminate regular company information
- On-line surveillance
- Inspection visits to members
- Receive and disseminate price sensitive company information
- Receive and manage investor complaints
- Receive and manage other complaints
- Manage and monitor OTC facilities
Finance & Administration: This department is responsible for the following:
- Conducting statutory and management meetings of the company and provide secretarial services relating thereto
- Prepare Annual and periodic Financial Statements
- Prepare Budgets and monitor the income and expenditure with the budget
- Controlling banking operations of the company
- Keeping inventory of the assets of the company
- Managing financial settlement of the trading operations
- Provide MIS to concerned departments
- Payments to different party bills after due verification
- Preparation of payroll of confirmed and casual staff
- Compliance of taxation rules and policies including withholdings, payments and filing of tax returns and documents
- Issuing certificates to brokers and other authorities
- Maintaining IPF(Investors Protection Fund) Accounts
- Oversee the development activities of the Exchange including acquisition and development of properties, schedule payments and coordinate associated activities
- Providing support to develop and implement corporate strategies, mission and vision
Research, Corporate Development & Information: This department carries out the following functions:
- Maintain library contents
- Press cuttings and press relations
- Produce portfolio and other CSE publications
- Public relations
- Investor’s information cell
The overall result from the empirical analysis suggests that the Chittagong Stock market of Bangladesh is not weak from efficient. However, the results presented in the study are not above limitations. The profit-making strategy, for example, was not minutely investigated by using any technical trading rules or adjusting transaction costs, such as bid-ask spread, brokerage fee, time lag of settlement procedures etc., and consequently no conclusion were drawn in this regard. Similarly, the unavailability of value weighted index considering non-synchronous trading may bias the results. The problems of non-trading, however, were tried to overcome by considering the individual company’s daily share return series and run test. The results of individual share returns show they are not following a random walk model. The results found in the study should be interpreted cautiously because the presence of autocorrelation violates the assumption of random walk model, which cannot be4 translated as inefficiency as noted by Ko and Lee, model.