The securities regulator has fined Haji Ahmad Brothers Securities Tk 1 million for breaching securities rules by creating deficits in the clients’ funds.
The penalty was imposed after completion of hearings in May this year, based on investigation reports submitted by the Dhaka Stock Exchange (DSE), according to an order issued by the Bangladesh Securities and Exchange Commission (BSEC) on August 10.
BSEC Executive Director and spokesperson Md Abul Kalam told the FE that a deficit in consolidated customers’ account (CCA) is considered a serious regulatory violation.
“The regulatory action has been taken to protect investors, strengthen market discipline and penalise offenders involved in irregularities,” he said.
Although the violations date back to an earlier period, Mr Kalam said the newly-formed commission had strengthened its oversight of brokerage houses to ensure financial transparency and investor protection.
The DSE enquiry revealed that Haji Ahmad Brothers Securities had withdrawn cash from its consolidated customers’ account (CCA) and maintained multiple BO accounts of clients with the same mobile numbers, email addresses and bank accounts.
The DSE inspection found a deficit in the brokerage firm’s CCA on several dates in 2024. The deficit stood at Tk 1.18 million on June 13, Tk 3.9 million on July 18, Tk 3.24 million on August 8, Tk 2.37 million on September 2 and Tk 2.85 million on September 3.
A CCA is an account maintained by a broker at any scheduled bank only for receiving investors’ deposits for buying stocks and paying their earnings. Deficits in CCA can lead to regulatory actions, including fine imposition and trade and licence suspension.
Following the inspection, the BSEC Enforcement Department summoned the brokerage firm for a hearing in April this year.
In a written statement submitted on May 11, Haji Ahmad Brothers Securities said that against a negative balance of around Tk 2.6 million, it had deposited Tk 3 million to the CCA, restoring the account to a positive balance.
The BSEC, however, rejected the explanation, saying it was not acceptable. The commission held that the violations constituted punishable offences under Section 22 of the Securities and Exchange Ordinance, 1969 and Section 18 of the Bangladesh Securities and Exchange Commission Act, 1993.
The latest action comes as the securities commission has tightened oversight of brokerage houses through risk-based audits as part of efforts to strengthen investor protection, improve financial transparency and restore discipline in the capital market.
The brokerage has been directed to pay the fine within 30 days from August 10 through a bank draft or pay order in favour of the BSEC. Failure to pay within the stipulated period may lead to further legal action.
Multiple BO accounts
The DSE probe also found that the brokerage had opened and maintained multiple BO accounts belonging to the same set of clients.
For instance, one email address, [email protected], was used for 16 active accounts, while [email protected] was linked to seven active accounts.
Haji Ahmad Brothers Securities told the regulator that some of the accounts were legacy accounts opened before the introduction of the current know-your-customer (KYC) and control frameworks. It said it had updated around 255 such accounts over the past two years and was continuing the rectification process.
The brokerage also said the irregularities resulted from procedural and interpretational gaps and did not involve any malicious intent or misuse of clients’ assets.
The BSEC rejected these claims too.
Long-standing problem
The latest regulatory action highlights that embezzlement and mismanagement of clients’ funds by brokers have remained long-standing unresolved problems. Scams involving major brokerage firms -- Salta Capital, Moshihor Securities, Crest Securities, Tamha Securities, Banco Securities, and Shah Mohammad Sagir & Company -- have collectively cost investors more than Tk 6 billion between 2019 and 2026.
It is the same story, same mechanism, only the faces behind the scam are different and so are the victims. Regulatory action always comes late after investors have already been robbed of their assets and cash.
The misappropriation of funds and shares by Salta Capital is the latest scam that was exposed in November last year. The fact that the broker had been siphoning off clients' funds first came to light during a sudden, physical inspection by the Dhaka bourse.
The probe report submitted in May this year revealed that Salta Capital embezzled Tk 1 billion from approximately 14,000 retail investors.
Trading in all scam-hit firms has remained suspended.
Salta Capital is the sixth broker that defrauded clients in about a decade, even after the market watchdog assured investors of taking measures to shield them from repetition of scams that happened earlier.
Meanwhile, the DSE refunded around Tk 300 million to the affected investors of four brokerage firms -- Banco Securities, Crest Securities, Tamha Securities and Shah Mohammad Sagir -- on a pro-rata basis although the full claim amount is much higher.
The DSE has settled claims by selling assets of these brokerage firms and from the Investors' Protection Fund.
