Around half of the active BO (beneficiary owner) accounts have not played any role in daily transactions over the years as those accounts either have zero balance or have never been used in share trading.
On the other hand, an investor is allowed to maintain many accounts opened with separate DPs (depository participants).
As a result, the traditional thinking about the number of investors based on the total number of BO accounts does not make any sense.
According to the Central Depository Bangladesh Limited (CDBL), the number of active accounts was above 2.53 million as on June 30, 2021.
Of those accounts, above 1.41 million had a share balance while 0.81 million accounts were active with zero balance and the remaining 0.32 million accounts were never used.
As a result, 1.13 million or 44.36 per cent of the active accounts played no role in daily share trading during the fiscal year (FY) 2020-21.
More than 50 per cent of active BO accounts had no contribution in share transactions in the previous FYs.
To trade in the secondary market and apply for primary shares, an investor is required to open a BO account with the CDBL through a DP, which is usually a stockbroker or a merchant bank.
"An investor is allowed to open a maximum of three accounts with a single DP. He can open accounts with other DPs and that's why the number of active accounts does not indicate the actual number of investors," said a senior official of the CDBL.
The number of active accounts having no role in transactions was 51.39 per cent in the FY 2019-20, 54.68 per cent in the FY 2018-19, 53.10 per cent in the FY 2017-18 and 55.63 per cent in the FY 2016-17, according to the CDBL.
An investor has to pay an annual fee of Tk 450 for a BO account. Of Tk 450, Tk 200 goes to the public exchequer, Tk 10 to depository participants (DPs), Tk 100 to the CDBL and the remaining Tk 50 to the Bangladesh Securities and Exchange Commission (BSEC).
Golam Rabbani, a general manager at Modern Securities, said the number of unused accounts would decline significantly in the next one or two years as the expectation of IPO (initial public offering) seekers had reduced following the new provision of the securities rules.
Presently, an investor is required to have a minimum investment of Tk 20,000 in listed securities to apply for IPO shares worth Tk 10,000.
"Most of the BO accounts earlier were used for applying for IPO shares. Now, it's not possible for the IPO seekers to keep active a large number of accounts subject to maintaining a mandatory investment of Tk 30,000," Mr. Rabbani said.
The securities regulator introduced the provision of having a minimum mandatory investment
of Tk 20,000 in listed securities following the plea of market operators.
The market faces a negative impact after the listing of a company as the successful IPO seekers come out of the market offloading the shares got through public offering, said the market operators.
The securities regulator earlier also introduced the provision of getting the IPO shares on a pro rata basis instead of a lottery system in a bid to ensure more participation of general investors in the secondary market.
Besides, the BSEC moved to remove some irregularities involving opening of the BO accounts.
In many cases, it was found that a person's national ID number, mobile phone number and bank accounts were used for opening BO accounts of another person.
As per the existing rules, three BO accounts can be opened with a single brokerage firm or a merchant bank against a NID card.
Of the three accounts, one will be for the BO account holder himself, one for his spouse and the other is their joint account.
According to the CDBL, the number of active BO accounts is above 2.03 million as on Monday.
Of the total, above 1.37 million are individual accounts while the remaining 0.64 million are joint accounts.
The number of BO accounts reached its peak at around 3.4 million in the fiscal year 2010-11, the year of the market bubble-burst, as people, lured by the soaring share prices, had rushed to open accounts with different brokerage houses and merchant banks.
