The Capital Market Stabilisation Fund (CMSF) that came into operation last year is moving in the desired direction, albeit at a slow pace. This is nothing unusual given the involvement of the interests of so many parties.
The performance of the Fund, which is run by a board of governors and headed by a high-profile former bureaucrat, in securing both undistributed cash and stock dividends from the listed companies has been mixed so far.
A total of 335 listed issues have unclaimed cash dividends worth Tk 9.56 billion and stock dividends valued at Tk 199.86 billion. The size of the fund is equivalent to the total of both.
The CMSF has so far got nearly half of the unclaimed cash dividend and a paltry sum of Tk 3.25 billion out of a large volume of stock dividend transferred. The securities regulator has extended the time to deposit the unclaimed dividends thrice so far. May 31 is the latest deadline. The BSEC cannot continue extending the deadline repeatedly. It needs to take action against the defaulting companies as stipulated in the rules concerned.
The response from the investors whose dividends, either in cash or stock, have remained undistributed, has also been poor. Fund officials have told the FE that they had received investors' claims on undistributed dividends worth only Tk 2.9 million. The Fund has settled 93 per cent of the claims and the rest will be settled soon.
The primary aim of the formation of the CMSF is to make available to the investors their due as unclaimed dividends. Amount disbursed against the funds made available by the listed companies to the CMSF is inadequate. The Fund must ensure expeditious disbursement of the dividend money to the rightful owners. Any other consideration must not debar them from that work.
The BSEC has picked up the idea of injecting the CMSF funds into the capital market to make the latter buoyant. In pursuance of that aim, the CMSF has so far invested Tk 1.5 billion into the stock market through the state-owned Investment Corporation of Bangladesh (ICB) in two phases.
The CMSF has also partnered with the ICM AMCL in the floatation of a closed-end mutual fund although the performance of mutual funds has been dismal in recent years.
Investment in stocks entails risks. The funds available with the CMSF belong to owners of undistributed dividends received from issuers, stockbrokers and portfolio managers, although they have not claimed the same for a certain period.
Yet, legally speaking, getting consent from the investors concerned is necessary while investing their money in stocks. Loss or gain from stock trading is also supposed to be added to the investors' accounts. The CMSF rules issued in June last year, however, say nothing about the distribution of loss/ profit made through the operation of the Fund in the stock market. The Commission needs to clarify this particular issue to avoid any future dispute.
Besides, third-party investment hardly works in the stock market. Macroeconomic parameters play an important role in deciding the direction of a stock market. Then again, performance of listed companies and investors' willingness to stay or exit largely determine the fate of the market. Other initiatives to revamp the market usually turn out to be short-lived.