The securities regulator has widened the scope of investment for directors, officers and employees of stock exchanges and market operators while retaining restrictions on their direct investment in stocks.
According to a new directive issued by the securities regulator, the officials concerned will be allowed to invest in non-convertible bonds, government securities, open-end mutual funds, exchange-traded funds (ETFs) and real estate investment trust (REIT) funds. ETFs and REIT funds, however, are yet to be introduced in Bangladesh's capital market.
Previously, the investment scope was limited to open-ended mutual funds for the targeted group.
The directive covers directors, officers and employees of stock exchanges, Central Depository Bangladesh Ltd. (CDBL), Central Counterparty Bangladesh Ltd. (CCBL), Bangladesh Institute of Capital Market (BICM) and Bangladesh Academy for Securities Markets (BASM).Online newspaper subscription
BICM and BASM have also been brought under the restriction in the latest directive, extending its application to organisations involved in capital market education, training and professional development.
The commission imposed restrictions on their direct investment in shares to prevent conflicts of interest and address concerns over the possible misuse of market-sensitive information by employees of capital market institutions, said Md Abul Kalam, executive director and spokesperson of the Bangladesh Securities and Exchange Commission (BSEC).
The restriction is particularly relevant and important for employees who have access to sensitive information relating to trading, clearing, settlement, depository operations, corporate actions or other market activities before such information becomes widely available.
The move is part of a broader effort to strengthen professional conduct and market integrity rather than merely restrict employees' personal investments, said Mr Kalam.
"The change therefore combines tighter restrictions on direct investment in listed securities with a wider scope for investment in fixed-income and diversified products," he said, adding that the restriction applies to BSEC officers and employees as well, with the directive having come into effect last week.Bangladesh economic report
The broader coverage indicates that the regulator is seeking to establish a common standard for individuals working across the capital market ecosystem, market operators said.
A DSE official, requesting anonymity, said the officials concerned and their dependents — sons, daughters, fathers and mothers — were previously not even allowed to open beneficiary owner's (BO) accounts.
Under the latest directive, however, they will be allowed to open BO accounts solely for investing in non-convertible bonds, government securities, open-ended mutual funds, ETFs and REIT funds.
The exemption of diversified investment vehicles reflects an attempt to strike a balance between preserving personal investment rights and securing market integrity, said Akramul Alam, head of research at Royal Capital.
The inclusion of BSEC officials means that the regulator itself is also subject to the investment restrictions.
"Even when there is no actual misuse of information, the public perception that an employee can benefit from privileged access to information may undermine confidence," said Mr Alam.
The BSEC's latest order is expected to reduce the scope for potential conflicts between institutional responsibilities and personal trading interests, he added.
Enforcement key to effectiveness
Market participants said the effectiveness of the directive would ultimately depend on proper monitoring and enforcement.
"Restrictions on paper are not enough. The regulator needs an effective monitoring and disclosure mechanism to ensure compliance," said a stockbroker, preferring anonymity.
Effective enforcement would require coordination among the BSEC, stock exchanges, brokerage firms, depository and other relevant market institutions.
The BSEC spokesperson said the commission would monitor the investment accounts of the individuals concerned and ensure that prohibited transactions do not take place.
"If the regulator finds any investment beyond the approved instruments, it will take action in accordance with the securities rules," he said.
