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The BSEC plans to allow brokerage firms to go public

The Bangladesh Securities and Exchange Commission is working to allow brokerage firms to raise capital through initial public offerings and to be listed on the stock exchange.

The BSEC announced the plan at a meeting with senior brokerage house officials on April 27, BSEC officials said.

They said the commission had proposed that stockbrokers increase their capacity by raising capital through IPOs or bonds.

BSEC Commissioner Shaikh Shamsuddin Ahmed told the New Age that if brokerage firms could increase their capacity, various wrongdoings in the market could be prevented.

He said that amid increased resources, stockbrokers could make quality investments in the market.

So the flow of money to the market would increase and surveillance would improve, he said.

In the plan, the BSEC focuses more on brokerage houses, which are subsidiaries of banks and do better deals.

The commission would also encourage brokerage houses to devote at least 51 percent of their paid-up capital to the stock exchange to transform themselves into banking subsidiaries.

Bank affiliates and their investment activities are exempt from their capital markets investment exposure.

This would free a large sum of money from banks’ exposure to capital markets and allow banks to inject more funds into the stock market, BSEC officials said.

However, market experts criticized BSEC’s move as there would be a conflict of interest for brokerage houses to come into the market and trade their own shares.

Former BSEC Chairman Faruq Ahmed Siddique said: “This is a very premature decision to allow brokerage houses to enter the market.”

He also said, “The brokerage houses are mostly weak in terms of fundamentals and I don’t think they could do anything good for the market.”

There are 242 brokerage houses and very few of them meet the IPO requirements set out in the BSEC public offering rules.

However, brokerage houses that are subsidiaries of banks fare better in terms of paid-up capital and business development.

The regulator is primarily encouraging the listing of banks’ stock exchange wings, BSEC officials said.

The country’s capital market has endured a dry spell of IPOs as the BSEC has only three IPO applications to process, having approved just one IPO in the last five months.

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