The Bangladesh Securities and Exchange Commission (BSEC) has eased restrictions on capital market investments by directors of market intermediaries, permitting them to invest in securities under a new regime of mandatory quarterly disclosures. The move, announced in a directive dated October 12 and signed by BSEC Chairman Masud Khan, modifies a previous order from September 1 that imposed a blanket ban on such investments.
Under the updated rules, directors of stock exchanges, Central Depository Bangladesh Ltd (CDBL), and Central Counterparty Bangladesh Ltd (CCBL) are now allowed to hold capital market securities. They must, however, file detailed quarterly reports of their personal and institutional investments with the commission within 10 days following the end of each quarter.
Despite this relaxation for directors, the investment prohibition remains unchanged for officers and employees of stock exchanges, CDBL, CCBL, as well as personnel at the Bangladesh Institute of Capital Market (BICM) and the Bangladesh Academy for Securities Markets (BASM).
Market insiders suggest the regulatory adjustment aims to better align governance practices with the practical realities of the capital market. Directors of these institutions often include trading right entitlement certificate (TREC) holders, corporate executives, and industry specialists whose participation can bring valuable expertise. They note that the earlier sweeping ban may have discouraged qualified professionals from serving on these boards.
The introduction of mandatory disclosures is intended to enhance transparency and allow the BSEC to oversee directors’ investment activities more effectively, enabling informed monitoring of potential conflicts of interest. However, some observers caution that the new framework could increase the regulatory body's workload, as it will need to verify the authenticity and completeness of self-reported data and ensure compliance.
Additionally, concerns remain about the potential for conflicts of interest under the revised rules. An executive from an asset management firm highlighted the risk that directors might trade on non-public, price-sensitive information before its disclosure, which could undermine market integrity despite the disclosure requirements.
Overall, the BSEC’s decision reflects a balancing act between fostering experienced leadership involvement in capital markets and maintaining rigorous oversight to protect market fairness and transparency.