The volume of investors' fund, allegedly, embezzled by the owners of the Crest Securities Ltd., a member of the Dhaka Stock Exchange (DSE), could be sizeable, sources said.
The brokerage firm, according to sources in the central Depository Bangladesh Limited (CDBL), has been maintaining as many as 21,000 active Beneficiary Owners' (BO) accounts.
However, the premier bourse is yet to determine the actual amount of liabilities of the brokerage house, as its head and all three branch offices remained locked and the owners traceless for the last several days.
"We will have to follow legal procedures to enter the offices of the Crest Securities to determine its liabilities, based on the actual claims made by the clients. We have called a meeting of the DSE board for Sunday to discuss the issue," said a top official of the DSE.
Asked about the assets of the Crest Securities, the DSE official said the brokerage firm's TREC (Trading Right Entitlement Certificate) and other stakes in the DSE could be sold to pay the dues of the clients.
On completion of the demutualisation of the DSE, the Crest Securities like all other members initially received its part in 40 per cent stakes in the DSE and it later took loan from banks keeping the same as collateral.
Later, the brokerage firm received Tk 37.87 million when a Chinese strategic partner bought 25 per cent of DSE stake.
"The stock exchange in addition to disposing of Crest's stakes can take support, if necessary, from its investors' protection fund to settle the claims of the clients," said the DSE official.
The DSE has requested the clients of the Crest Securities to submit relevant papers against their claims.
It also requested the central bank to freeze the bank accounts of the owners of the Crest Securities, and urged the immigration department to prevent the firm's owners from leaving the country.
The DSE official said the Crest Securities has three directors and all of them have been at large for the last three days, triggering tensions among the clients of the firm.
The Crest Securities is among the top 30 brokerage firms in terms of transactions. Md Shahidullah is its managing director.
Some clients alleged that their cheques issued by the Crest Securities bounced, while others claimed that their shares were sold by the brokerage firm without informing them.
Chairman of the Bangladesh Securities and Exchange Commission (BSEC) Prof. Shibli Rubayat-Ul-Islam said the regulator will act 'strictly' to ensure the protection of the clients of the Crest Securities.
"The CID will be given the responsibility on Sunday to arrest the owners of the brokerage firm," said the BSEC chairman.
At first, the premier bourse will take all necessary steps to secure the clients' investments made through the Crest Securities, he added.
"Besides, we have taken steps to freeze the bank accounts of the owners of the brokerage house," said Prof. Islam.
Investors also have the responsibility for securing their investments through providing accurate information in the form of BO accounts, he added.
"Investors can know their shareholding status at any time online, as the securities regulator has introduced SMS service. In that case, they must open BO accounts by providing accurate information," said the BSEC chairman.
Contacted, CDBL managing director Shuvra Kanti Choudhury said some 20 clients of the Crest Securities applied on Thursday to know their shareholding status.
"The investors will receive information about their shareholding on Sunday," he said.
Asked, DSE officials could not provide any information regarding the paid-up capital of the Crest Securities.
On May 29, 2019, the securities regulator enacted the risk-based rules setting minimum capital requirement ranging between Tk 50 million and Tk 150 million for the stock brokers in accordance with the nature of their business in the capital market.
The paid-up capital of a significant number of brokerage firms of the premier bourse still remain poor, compared to stipulated capital requirement set to avert the risk of doing business.
"Many brokerage firms have not increased their paid-up capital despite having made profits year after year. Their capitals must be increased to reduce investment risks," said Md. Rakibur Rahman, a DSE director.
He also underscored the need for issuing new TRECs in line with the provisions in the demutualisation scheme.
Out of 250 brokerage firms, the paid-up capitals of six firms are still below Tk 10 million, while 15 brokerage firms have paid-up capital worth Tk 10 million each, according to the DSE data.
Besides, 93 brokerage firms are doing business with paid-up capitals ranging between Tk 10 million and Tk 50 million each, while the paid-up capital of the remaining brokerage firms are above Tk 50 million each.
Earlier, the BSEC asked the stockbrokers to submit a framework on their capital adequacy by June 30, 2020. Later, the deadline was extended up to December 31, 2020.
