US corporate executives enjoyed the privilege of diverting investment to a project known as the special purpose enterprise (SPES) with sufficient confidentiality. Taking advantage of this, Enron, an energy behemoth, in connivance with the audit giant Anderson, laundered billions of dollars somewhere else. This resulted in total eclipse of Enron, the world's seventh largest company in 2001. A few other companies including Worldcom met similar fate. In fact, corporate deluge of the US was no less disastrous than the Twin Tower carnage. The US government immediately went into action. From then on, the concept of 'independent director' was introduced, purely with the aim of protecting the interest of the general investors. It has now become a global phenomenon.
Even India, known for its anti-reform psyche, has encoded the provision of the 'independent director' in Companies Act 2013. Our Companies Act 1994 has virtually become obsolete. There have always been various developments in the corporate sector and the authorities need to take note of these providing legal coverage, e.g. participation of director in board meeting by video conferencing or through electronic means. Our Companies Act should be equipped with the state-of-the-art corporate laws. Proposal for scrapping the system of appointing 'independent director' has emanated from a retrogressive thought. Of course, the Securities Exchange Commission (SEC) has the responsibility of overseeing that purpose and sprit of appointing the independent director are properly observed. In this connection, it may be mentioned at the same time, the US government set up an accounts body known as the public company accounting oversight board with a view to overseeing the accounts of the publicly traded companies. Thus the exclusive authority of 'final say' about accounting matter by the elite organisation of the chartered accountants came to an end.
Main function of the Bangladesh Securities and Exchange Commission (BSEC) is to protect the interest of the general investors, to regulate the activities of the internal players of the capital market, to take necessary steps for overall development of the capital market and to punish the shenanigans. With a view to achieving any or all the aforesaid goals, the BSEC can stretch its hand up to the required length. There is no denying the fact that ever since its inception, the BSEC has, on many occasions, remained confused or involved in nitty-gritty issues. Change of name or fixing market lot of share was not that much important to act upon. The most important function it has failed to perform is to put on trial the suspects who were behind the scams of 1996 and 2010. Everywhere around the globe in case of any share market scam, the government acts as a prosecutor, but in Bangladesh, the government was put on the dock of the accused because of its incept handling of the issue. The government could have been absolved of its responsibility if the shenanigans of the share market were put on trial. This is the greatest failure of the BSEC. Articles of Association of a company mentions the number of shares a director is likely to own. Holding of AGM regularly, publication of comprehensive audit and annual reports, sufficient disclosure and transparency of the activities of a company can protect the interest of all share holders in general and minority share holders in particular. The BSEC is to supervise and monitor the above-mentioned functions.
A stock exchange is by any definition in the capital market science is a market where shares and securities are bought and sold. Capital market is a wide term and definitely it provides capital for an enterprise. But a share market, so to say stock exchange, does not supply capital nor does it finance any company or business organisation. Stock exchange does not or cant keep track of the money flowing there. If the economy of a country is vibrant or buoyant, so will be the share market, not the other way. We have seen the helplessness of the bourses during severe global recession of 2007-2008 period. Not even a dying corporate organisation could be rescued under the aegis of bourse. However, entrepreneurs/sponsors can raise capital through initial public offering (IPO). This money joins the national mainstream economy and helps raise the GDP. But unfortunately, the IPO culture is yet to properly develop in the country. During the last 3 decades, the government has provided various incentives and tax concession so that more companies go public. The response has not been satisfactory. The Dhaka Stock Exchange has always been vocal with these demands. But hardly any member in spite of being sponsor of a company has gone for IPO. Four state-owned commercial banks have been converted into public limited companies long ago but they are yet to go public.
Moreover, the government owns substantial number of shares in various industries. Not a single share was off-loaded during more than a decade. The BSEC can take up this issue with the government. That will help the bourse to be vibrant. In the present context of Bangladesh, IPO should be followed in a very simple and traditional manner. There is no death of general investors for IPO.
A lot of hiccup is raised from time to time about the loss incurred by the investors. First of all, a borderline is to be drawn between the investors and the traders. Then nobody compels a person to come and buy a share at a price however high it may be. There may be people in the market who may allure, misguide the innocent investors. It is the responsibility of the SEC to take actions against these delinquents. The DSE members have been allowed to open branches across the country but the SEC does not regulate their activities. Some of these branches operate and run MLM style business. Since a share market is situated in the metropolitan areas, it easily draws the attention of the media and gets wide publicity either for good or bad. In the last political turmoil, the vegetable growers suffered very heavily, but neither the government nor the media has thought anything about them.
A stock exchange cannot be an isolated entity. As told earlier, it will be bearish or bullish depending upon the prevailing economic situation of the country. It is stupidity of the highest order to think that the share price will always go on rising and rising. Mandarins of the Finance Ministry must understand the role of a share market and also what it is.
When in 2001 Saifur Rahman became the Finance Minister, many people thought that he would jump upon the market to rejuvenate it. But since he had the sound idea about a share market, he allowed it to remain what it was. He could not be misguided by the sermons of the motivated wise men, who had tried to over-blow the role of a share market. Saifur Rahman remained the Finance Minister for more than a decade but never share market had to be sent to the ICU. During his incumbency, the GDP growth was satisfactory sans so-called buoyant share market.
Now-a-days much pressure is being created upon the central bank, that is the Bangladesh Bank, to persuade the commercial banks to lavishly invest in the share market. There has been a global caution that the people's deposits are not frittered away by investing their money in risky sectors like pension fund and share market. We hope that the Bangladesh Bank is well aware of its responsibility.