The Bangladesh Securities and Exchange Commission (BSEC) formed a five-member investigation and inquiry committee last Sunday (September 1) to examine past irregularities, corruption, and market manipulation in the country’s capital market. The issues to be investigated reportedly involve allegations against BSEC officials themselves. The Commission has stated that it intends to begin its reform efforts from within. However, questions have arisen regarding the credibility of BSEC investigating its own misconduct. Additionally, the inclusion of two individuals with close ties to the capital market in the investigation committee has sparked further controversy.

The 918th emergency commission meeting, chaired by BSEC Chairman Khondoker Rashed Maqsood, was held last Sunday, September 1. During the meeting, the Commission decided to establish an “Inquiry and Investigation Committee” to probe past irregularities, manipulations, and corruption in the capital market, with the goal of restoring stability and investor confidence. The committee is headed by Dr. Zia Uddin Ahmed, founder and chairman of Terra Resources International, USA, and chairman of VIPB Asset Management Company. The other four members include Yawer Saeed, former managing director of AIMS Bangladesh Limited, Md. Shafiqur Rahman, former member of the National Board of Revenue (NBR), Barrister Md. Zeeshan Haider, Deputy Attorney General of the Bangladesh Supreme Court, and Md. Anowarul Islam, Executive Director of BSEC. The committee has been tasked with investigating 12 issues and submitting a report to the Commission within 60 working days.

In the past, the government established two investigative committees following the stock market crashes of 1996 and 2010. However, this marks the first time that BSEC itself has initiated an investigation into past irregularities and corruption. Allegations have surfaced that BSEC officials were involved in approving issues that benefited certain vested groups. Given this context, questions have been raised about the rationale behind BSEC forming its own investigation committee. Some experts believe that, as in the past, it would have been more effective and logical for the Ministry of Finance to establish the committee.

According to BSEC, the committee was formed under the authority granted by Section 21 of the Securities and Exchange Ordinance of 1969 and Section 17(a) of the Bangladesh Securities and Exchange Commission Act of 1993. These provisions typically allow for investigations into listed companies, stock exchanges, and market intermediaries. However, they do not explicitly grant BSEC the power to investigate its own employees. Nonetheless, BSEC officials have stated that if their own officers are found to be involved in the issues under investigation, action can be taken against them under the Commission’s service rules. Therefore, the committee indirectly has the authority to take action against BSEC’s own employees.

When asked about the matter, former Adviser to the caretaker government and former BSEC Chairman Dr. A.B. Mirza Azizul Islam told Bonik Barta, “The investigation should be carried out by a committee of impartial individuals. The less BSEC is involved, the better. Whatever the committee uncovers in its investigation must be addressed appropriately.”

Dr. Zia Uddin Ahmed and Yawer Saeed, who lead the investigation and inquiry committee, are both associated with asset management companies. Dr. Ahmed continues to serve as chairman of VIPB Asset Management. Additionally, his firm, VIPB Asset Management, along with five other institutional investors, protested the extension of two funds managed by LR Global Bangladesh. This ultimately led to BSEC ordering the removal of LR Global from managing these funds. The matter was eventually taken to court. Furthermore, one of the issues under BSEC’s investigation involves irregularities and manipulation by Quest BDC Limited, with which LR Global Bangladesh’s CEO Reaz Islam is allegedly connected. This raises questions about whether Dr. Zia Uddin Ahmed’s affiliation with VIPB Asset Management presents a conflict of interest.

To introduce the members of the investigation committee, BSEC held a press conference yesterday (Monday, September 2). Responding to questions about potential conflicts of interest, Dr. Zia Uddin Ahmed said, “The process of resigning from my position as chairman of VIPB Asset Management is underway. Additionally, as chairman, I am not involved in the investment decisions of the funds managed by the company.”

On the other hand, another member of the investigation committee, Yawer Saeed, resigned from his position as Managing Director of AIMS Bangladesh on Thursday, August 29. During his tenure at the asset management company, investments were made from the ‘Reliance One the First Scheme of Reliance Insurance Mutual Fund’, and ‘Grameen One: Scheme Two Mutual Fund’ into Beximco Green-Sukuk Al Istisna’a’s units. Additionally, investments were made in shares of Fortune Shoes from the ‘Grameen One: Scheme Two’ fund, where the value of the investments increased by 613 percent and 1,463 percent based on market value compared to the purchase price. This information was noted in the portfolio reports of the fund on June 30, 2021, and June 30, 2022. The matter of Beximco’s Sukuk and Fortune Shoes is currently under investigation by the Bangladesh Securities and Exchange Commission (BSEC). In this context, questions have arisen regarding whether Yawer Saeed’s past involvement in these two securities as an asset manager could create a conflict of interest while he serves as a member of the investigation committee.

Regarding this, Yawer Saeed said, “What’s important is whether I’m performing the task I’ve been appointed for with honesty. Many so-called ‘Pirs’ and ‘Dorbeshes’ have been in this market for years. Even though the Pirs and Dorbeshes are no longer around, their disciples still exist. There is a committee within the asset management team that makes the decisions about which companies to invest in. At my age, I don’t decide whether to invest here or there. I took a hit by investing in Sukuk, so I’d be the angriest, feeling that the one who caused me to lose money should be held accountable.”

In response to whether his anger could influence the investigation process, he said, “That’s why there are various people in this investigation committee. It’s not just about what I say. There are administrators, barristers. If we make a mistake, they will point it out. But let us do our job.”

Analysts, however, believe that appointing individuals with connections to the capital market to the committee could lead to conflicts of interest during the investigation process. This could also raise questions about whether the investigation is being conducted impartially.

On this issue, Professor Dr. Mahmood Osman Imam from the Finance Department at the University of Dhaka told Bonik Barta, “If individuals associated with any capital market-related institution are appointed as members of the investigation committee, it could create conflicts of interest. Moreover, the committee should have included professional auditors and lawyers experienced in company and securities law. If controversy arises in such initiatives, it could undermine the primary objective. Questions may arise about whether this is merely an eyewash. I believe that a commission needs to be formed to review the activities of the capital market over the past 15 years. In this case, a professional with comprehensive experience in the capital market should be entrusted with the responsibility.”

In the first phase, the BSEC-formed investigation committee has been tasked with investigating a total of 12 issues. These include probing all matters related to the issuance of Beximco Green-Sukuk Al Istisna’a, investigating all matters related to the IFIC Guaranteed Sreerpur Township Green Zero Coupon Bond issuance, and examining all matters regarding the approval or nomination of ABG Limited, a subsidiary of Bashundhara Group, as a strategic partner or investor of Chattogram Stock Exchange PLC (CSE), including the allocation, acquisition, and price determination of shares. Other investigations will focus on issues related to the IPO approval and issuance of Best Holdings Limited.

The committee will also investigate irregularities and manipulations related to Al-Amin Chemical Industries in the capital market, including the manipulation of share acquisition in the block market and the fulfillment of BSEC-imposed conditions for the company’s transfer from the ‘over-the-counter’ (OTC) to the ‘Small-Medium Enterprise’ (SME) platform. Furthermore, the committee will look into irregularities and manipulations related to Sonali Paper and Board Mills Limited (SPBML) in the capital market, including its re-listing from the over-the-counter (OTC) market to the main board of the Dhaka Stock Exchange (DSE) in 2020, and investigate individuals and organizations involved in the abnormal increase in the company’s share price.

Additionally, the committee will investigate all irregularities and manipulations related to Fortune Shoes Limited in the capital market, including irregularities in dividend distribution to investors and the involvement of individuals and organizations in the company’s share price increase. Other areas of investigation include capital raising through private and public offers by Ring Shine Textiles Limited, exaggeration of sales in the annual financial report, and the transfer or laundering of funds through bank accounts. The committee will also examine irregularities and manipulations related to Acme Pesticides Limited in the capital market, including irregularities in dividend distribution to investors and the repayment of National Finance’s loan from IPO-raised funds.

Investigations will also cover irregularities and manipulations related to Quest BDC Limited (formerly Padma Printers and Colors Limited) in the capital market. Additionally, the committee will investigate irregularities and manipulations related to Coppertech Industries Limited in the capital market. Furthermore, share acquisition or transfer, disclosure of price-sensitive information, abnormal price increases in the secondary market, and all related irregularities and manipulations in the capital market concerning Emerald Oil Industries Limited will also be investigated.

Regarding the investigation committee’s activities and potential conflicts of interest, BSEC Chairman Khondoker Rashed Maqsood said at a press conference, “If any issue arises during the investigation that is even remotely related to the committee members’ organizations, the concerned member will remove themselves from the investigation of that issue. This is a widely practiced approach globally. Through the committee’s activities, you will see whether the matter is proceeding correctly. If we cannot fulfill the mission for which we are here, we will not remain here—that is our clear stance.”