The securities regulator has reinforced its action against stock brokers who have mishandled investors' funds, a senior official has said.
The Bangladesh Securities and Exchange Commission (BSEC) got tough as past behaviour of many brokers could not be corrected fully despite repeated actions.
"Our stance over the safety of investors' funds is very clear. No one will be spared if found guilty of mishandling investors' funds," said Mohammad Saifur Rahman, an executive director with the Commission.
As part of its ongoing crackdown, the Commission took disciplinary action against a stock broker of the Dhaka Stock Exchange (DSE) on February 19 whose consolidated customers' account showed a substantial shortfall.
The securities regulator has imposed a large amount of penalties on 32 stock brokers of both stock exchanges in the last four years after such finding shortfalls were discovered.
According to the existing rules, every stock broker is required to maintain a consolidated customers' account in its name with any bank only for the deposit of the money received from the customers and for the payment to them.
"The owners of the funds deposited in the consolidated customers' accounts are the investors only. The stock brokers have no right to sidestep money from the consolidated customers' accounts," said Rahman, also the BSEC spokesperson.
He said the BSEC had earlier detected many such incidences of fund transfers and had to struggle to sort those out.
The BSEC had found the incidences of even purchasing 'generator' and paying 'salary' of staffer with the funds taken away from the customers' accounts.
"Investors face difficulties if their funds are taken out from the consolidated customers' accounts. That's why we are unwilling to spare anyone responsible for the mismatch between the deposits and the actual funds available in the accounts," Mr Rahman told the FE.
According to DSE officials, the shortage occurs in the consolidated customers' account when a stock broker purchases securities for his client keeping dues or takes out funds for his or her personal purposes.
According to the BSEC information, there was a shortfall of Tk 226.44 million in the consolidated customer account maintained by Shyamol Equity Management.
And the shortfall reached over Tk 95.69 million as per the report submitted by February, the BSEC said in a statement.
Preferring anonymity, an official of the Shyamol Equity Management said they closed the shortfall in the consolidated customers' account by February 13.
"But the report of depositing the fund was not submitted to the BSEC in due time," the official said.
According to the BSEC, the securities regulator imposed penalties on nine stock brokers in 2018 for the shortfalls.
The stock brokers, which were fined, were Saad Securities, Salta Capital, Ali Securities, Haq Securities, M Securities, and PFI Securities.
The stock brokers which were fined or warned in 2017 were ACI Capital Management Services, Indicate Securities Consultants, Md. Fakhrul Islam Securities, Azam Securities, Saya Securities, Harun Securities, Wifang Securities, and Associated Capital Securities.
The brokerage firms which were fined in 2016 were Spur Shares & Securities, Haji Ahmed Brothers Securities, Salta Capital, Sinha Securities, S. R. Capital and NCCB Securities and Financial Services.
Globe Securities, Alpha Securities, Western Securities Investment Management, Holy City Securities, Joytun Securities International, United Financial Trading Company, Hillcity Securities, and MeenHar Securities were fined in 2015 due to shortfalls found in the consolidated customers' accounts.
Brokers remain defensive, however.
Shakil Rzivi, a former DSE member, said sometimes the staffers of brokerage houses embezzle investors' funds when the owner remains absent for a long time.
"But there is no scope for escape by embezzling investors' funds. There is an instance of repaying investors' dues by selling the membership by a stock broker," Mr Rizvi said.
He said the problems regarding the shortage of funds in consolidated accounts are resolved sincerely.
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