The New Nation - Internet Edition

Staff Reporter

Small investors yesterday staged demonstration in front of the Dhaka Stock Exchange (DSE) in the noon as prices of almost all the shares were falling following the excessive intervention by the regulator Securities and Exchange Commission (SEC).

They chanted slogan against the SEC and DSE top officials and blamed them for the present situation of the stock market

They said "unnecessary intervention" and "unwise directives" by the regulator resulted in the loss of hundreds of crores of takas of small investors. The SEC officials are taking care of the interest of the vested quarters, they alleged.

Talking to The New Nation, Sajid Hosain, a student of University of Dhaka, also a small investor said, "Foolish directives by SEC are destroying the market" and that small investors were being driven away from the market due to unrealistic steps of SEC.

"Small investors are trying to save their remaining portion of capital by selling shares hurriedly. They are incurring huge loss due to the panic sale," he said.

Daily turnover of the market came down to around Tk. 600 crore. On Tuesday the DSE turnover was Tk 629 crore, Tk 116 crore less then previous day. Of the 243 issues which changed hands, 49 gained, 178 declined and 16 remained unchanged.

The DSI general index shed by 86 points or 1.56 per cent to close at 5400 points while the DSI index fell by 65 points or 1.55 per cent to close at 4428 points.

Experts said the capital market is passing through an uncertain phase because of arbitrary intervention by the regulator.

"General investors are quite nervous and uncertain due to frequent regulatory moves," mutual fund operator Yaweer Sayeed said.

Dhaka Stock Exchange saw its highest ever turnover of Tk 16.92 billion on February 2. But on Tuesday it dropped to Tk 6.29 billion, a 37 per cent fall in 25 trading sessions.

Under the law, the Securities and Exchange Commission (SEC) is obliged to protect the interest of the investors.

However, its recent move to intervene in the Dhaka Stock Exchange's board election is seen by experts as unjustified.

In a directive issued on February 14, the SEC made obtaining a 'no-objection' or 'clearance' from them mandatory before filing nominations in the board elections.

The directive reads that the market regulator took the decision according to the section 20A of the Securities and Exchange Ordinance, 1969, which empowers the SEC to take such action.

According to the aforesaid section of the Ordinance, the Commission can issue any order or directive to all stakeholders 'in the interest of investors or securities market or for the development of securities market'.

Market observer and research director of BIDS Zaid Bakht said that such type of intervention over who can sit on the board of a company is not desirable.

"It amounts to interfering in a company's autonomy."

The DSE is a public limited company, which is responsible for listing of companies, operating the market and facilitating trade of shares.

The move does not ensure protecting investors' interest, Bakht said.

"It is more like interfering in a company's operation and in no way it can benefit the investors," added Bakht, who also is member of the SEC's advisory commitee.

There are allegations from some quarters that the current DSE president Rakibur Rahman was behind the SEC move in an apparent effort to influence the DSE board.

The board elections were scheduled for March 3 and the deadline for filing nominations was on February 15. The SEC directive came just a day before that deadline.

The SEC move prompted the current DSE board to postpone the elections, which will now be held on March 21.

On March 3, the market watchdog cleared 10 out of 13 aspirants for filing nominations. The three who did not get cleared were ex-DSE president Ahmed Iqbal Hasan, ex-senior vice president Ahmed Rashid Lali and Anwar Hossain.

Speaking to the press, Ahmed Rashid Lali said that the decision would hurt the market badly.

"As an aspirant for the DSE polls, I have the right to know why I was not cleared," he said.

Transparency and accountability in all the realms of the capital market is needed to protect investors' interest, added Lali.

According to market watchers, the SEC appears to be acting irrationally after the current chief took office in May 2009.

On November 2009, the regulator asked issuers to refund IPO subscriptions directly to the investors' bank accounts rather than handing or posting the refund warrant

The move created a huge hassle for a good number of IPO aspirants of Golden Son, who are yet to get their refund, almost after four months. The same thing happened with some other mutual funds.

Following the incident, the SEC recently directed issue managers to refund the IPO subscription according to investors' preferences.

In another example regarding the High Court ruling on mutual funds' bonus and rights shares, the SEC said that it would appeal against the ruling. It caused a slump in mutual fund prices, affecting many investors.

The regulator also seemed to shuffle decisions regarding margin loans to trade shares.

Between October last year and February this year, the SEC gave at least six directives regarding issuing margin loans, which hugely affected the market