More than half the active BO (beneficiary owner) accounts are not playing any role in daily share transactions as they have either zero balance or have never been used in share trading.
This has been happening over the last five years, sources familiar with the matter have told the FE.
The officials involved with operation of BO accounts said most of the accounts were being used mainly in applying for IPOs (initial public offerings).
An official of a brokerage firm said the investors were not keeping their accounts active for nothing, as they were paying an annual fee of Tk 450 for every BO account. They are keeping the accounts active only for applying for IPO shares.
"Most of the accounts, which are playing no role in the secondary market, are used only in applying for IPO shares," said Golam Rabbani, general manager at Modern Securities.
As of June 30 last, more than 50 per cent of the active BO accounts were not used in any transaction of shares of the listed securities.
The Central Depository Bangladesh Limited (CDBL) said those accounts either had no share balance or they were never used by the account holders.
The number of active BO accounts stood at 2.81 million (28.1 lakh) as of June 30, 2019, according to the CDBL.
Only 1.27 million of the accounts had share balances, while the remaining 1.54 million or 55 per cent accounts either had zero balance or had never been used in share transaction.
Similarly, 53 per cent active BO accounts had no role in daily transactions in 2018. Such accounts in 2017 were 56 per cent of the total against 51 per cent in 2016 and 50 per cent in 2015.
The number of BO accounts with share balances was 1.59 million in 2015; 1.53 million in 2016; 1.29 million in 2017; 1.30 million in 2018; and 1.27 million as of June 30 2019.
When asked, a senior official of a brokerage firm said most of the BO accounts having share balances were also not being used in daily transactions.
"I think hardly 30 per cent of the accounts having share balances play their part in daily transactions," the official added.
The securities regulator BSEC has moved to remove some irregularities involving opening of BO accounts.
The Bangladesh Securities and Exchange Commission (BSEC) findings reveal that in many cases it was found that the national ID number, mobile phone number and bank accounts of one person were used for opening BO accounts of another person.
"An investor cannot open a BO account using the mobile phone number or NID number of another person. It's illegal," a BSEC official said.
Insiders said in some cases around 200 BO accounts were opened using a single mobile number.
Following a directive of the BSEC to remove such irregularity, the CDBL is working on a compliance report to this end.
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.
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.
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 BSEC.
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