Dhaka, April 29: The issue of restructuring the Securities and Exchange Commission (SEC) once again came to the forefront at a roundtable in Dhaka yesterday on the back of its failure to regulate the stockmarket.
Unless the SEC is reformed with honest and capable people, the stockmarket would never be regulated properly and would face a stringent disaster in future, said the discussants who also urged the government to make the share market probe report public officially.
One of the discussants sought closure of the stockmarket until and unless the problems are sorted out and resolved.
They spoke at a roundtable on "Share market: what after the probe report?" organised by Bangla-language newspaper Prothom Alo. Abdul Kaium, joint editor of Prothom Alo, and Shawkat Hossain, joint news editor, moderated the roundtable, while Prothom Alo Editor Matiur Rahman delivered the opening remarks.
Faruq Ahmad Siddiqi, a former chairman of the SEC, said the commission, meaning its chairman and members, should be removed and replaced by efficient people.
"However, restructuring the SEC does not mean that everything will be changed. The surveillance remains the same for a Tk 2,000 crore turnover market as it was for a Tk 30 crore turnover market," he said referring to the inadequate workforce of the regulator.
At least three chartered accountants, two legal experts and one financial analyst should be included in the SEC's workforce. "But with the existing salary structure it cannot be expected. Separate payout structure, instead of government structure, should be there," he said.
Siddiqi said the probe report should be made public officially as it was also published in the media.
"What we saw in the report that it has served a lot of information such as where the weaknesses were and what actually happened," he said.
On the probe report's weakness, the career bureaucrat said the probe committee compared the recent debacle with the 1996 market crash and identified the primary market as a major reason for the debacle.
"I differ with the findings. Scope for price inflation in the primary market has been created due to overvaluation of shares in the secondary market," he said.
Debapriya Bhattacharya, distinguished fellow of the Centre for Policy Dialogue, said the delay in publishing the report is hurting the government's image that it revived through forming the probe committee. "Indecisiveness is worse than taking no decision," he said.
Bhattacharya identified the misuse of existing rules due to structural weakness of the regulator, lack of coordination among all economic systems, weak surveillance system in the market, and a narrow political mindset as major reasons behind the latest stockmarket crash.
He said it cannot be expected that the government will agree with all findings and recommendations of the probe committee. Whatever happens, he said, the current uncertainty over publishing of the probe report should be resolved.
Because of this, he said, neither the market nor the regulator can understand what should be done.
About reforms in the market, Bhattacharya said, "The reshuffle should have to be started from the SEC."
Arif Khan, managing director of Zenith Investments Ltd, said SEC should not be blamed wholesale; there must be some capable people.
"The market should be regulated only by the SEC, which also should be advised. People with integrity and managerial capacity within the commission can ensure it," he said.
Although many reasons were identified for the recent market disaster, no-one talks about the role of auditors who are responsible for making the financial statements, Khan said.
The role of Bangladesh Bank was not also discussed thoroughly. "As most of the commercial banks had exposure to the stockmarket, the market was flooded with enormous liquidity. But the central bank overlooked it," he said.
"The central bank was late in looking into the matter. If it curbed the banks' over-exposure timely, the market would not have faced this situation," he said.
Yawer Sayeed, managing director of AIMS of Bangladesh, said the crash in the stockmarket would not be possible without collusion of the regulator and its lack of knowledge.
"Every step was compromised. If there was no law, why issuance of preference shares was approved? How preference shares were issued with higher prices after rejection of rights issue proposal?" he questioned.
Shakil Rizvi, DSE president, said, "Synchronisation between the economy and capital market is needed to avoid another debacle in the capital market." Talking about the demutualisation of stock exchanges, he said, the process is going on. "It will take time."
AK Azad, president of Federation of Bangladesh Chambers of Commerce and Industry, said: "I request the government to form a taskforce to punish the market manipulators." He also said the anti corruption commission should investigate that who siphoned money out of the market.
"When the banks crossed the 10 percent exposure limit, Bangladesh Bank did not raise the issue. When the debacle started it asked the commercial banks to take funds out of the capital market," he said.
"The central bank will have to explain that why it avoided taking actions when the banks were overexposed to the capital market. I have a question for the probe committee: Why it avoided Bangladesh Bank's role?" he said.
Bangladesh Bank is trying to blame the general investors for the market debacle and that is not right, he said. "Bangladesh Bank is liable for the market crash in January."
He also said the commercial banks made hefty profit of Tk 2,000 crore from the capital market, and the commercial banks should invest their profits in the capital market.
Source: The Daily Star
