SEC Bangladesh Overview

1.
ORIGIN OF THE REPORT
This assignment is originated as the course requirement of FIN 335, which is termed to be a
major course for the B.B.A program. As this assignment is based on Security Exchange
Commission of Bangladesh, so we have to work with limited time. We were assigned the
assignment on “Security Exchange Commission” around 30 days ago, and we went around
looking for its source of existence and also searched the internet to get enough updated
knowledge.
1.1 OBJECTIVE OF THE STUDY
 To present an overview of Security Exchange Commission.

 The Function of Security Exchange Commission.
 The objective of this report is to make readers know about Security Exchange
Commission of Bangladesh.
1.2SCOPES AND METHODOLOGY OF THE REPORT
SCOPE:
After being assigned the assignment, we found that the scope of the report was confined to
various related websites. The report is solely based on terms and concepts related to Security
Exchange Commission.
METHODS:
This assignment has been prepared on the basis of experience gathered during the period of
FIN 335 course. For preparing this assignment, we have also got information from various
websites and Security Exchange office at Motijheel ‘ Jibon Bima Bhaban ‘which may
provide successful results considering this report.
1.3 LIMITATIONS
 Some websites had no direct reference.

 Unable to collect enough information from due to their official restrictions.
 Data collection process was irregular.
 Due to other courses and exams, we did not get enough time to give 100% time.
 Due to excess load shedding, it was difficult to work.
Security Exchange Commission

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Background
SEC was established on 8 June, 1993 under the Securities and Exchange Commission Act,
1993. The Chairman and Members of the Commission are appointed by the government and
have overall responsibility to administer securities legislation. The Commission, at present
has three full time members, excluding the Chairman. The Commission is a statutory body
and attached to the Ministry of Finance.
Mission
 Protect the interests of securities investors
 Develop and maintain fair, transparent and efficient securities markets
 Ensure proper issuance of securities and compliance with securities laws
Functions
 Regulating the business of the Stock Exchanges or any other securities market.
 Registering and regulating the business of stock-brokers, sub-brokers, share transfer
agents, merchant bankers and managers of issues, trustee of trust deeds, registrar of an
issue, underwriters, portfolio managers, investment advisers and other intermediaries
in the securities market.
 Registering, monitoring and regulating of collective investment scheme including all
forms of mutual funds.
 Monitoring and regulating all authorized self regulatory organizations in the securities
market.
 Prohibiting fraudulent and unfair trade practices relating to securities trading in any
securities market.
 Promoting investors’ education and providing training for intermediaries of the
securities market.
 Prohibiting insider trading in securities.
 Regulating the substantial acquisition of shares and take-over of companies.
 Undertaking investigation and inspection, inquiries and audit of any issuer or dealer
of securities, the Stock Exchanges and intermediaries and any self regulatory
organization in the securities market.
 Conducting research and publishing information.
Securities and Exchange Commission
Securities and Exchange Commission a government body under the ministry of finance
established to regulate the securities market in Bangladesh. It was established on 8 June 1993
under the Securities and Exchange Commission Act 1993. Prior to its establishment, the
securities market was regulated under Capital Issues Act 1947. The main office of SEC is at
Dilkusha Commercial Area, Dhaka.
SEC is headed by a chairman appointed by the government and has four members under the
chairman. Two of the members are full-time executives and are nominated directly by the
government. Of the other two, one is a nominee of the BANGLADESH BANK and the other, of the

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ministry of finance. The members are responsible for registration, capital issue, corporate
audit, administration and finance, supervision and monitoring the corporate and legal affairs,
research and development, and education and training. In addition to members, there are four
executive directors, one corporate accountant, and one legal counselor.
The prime objectives of SEC are to protect integrity of the stock market and the interests of
the investors in securities, to develop the securities market, to ensure proper issuance of
securities, and to promulgate new laws, orders, rules and regulations for controlling, and
guiding the securities market. SEC is to protect the interests of investors through regulating
the market within the framework of the SEC Act. It approves capital issues and prospectus,
restricts illicit transactions and insider trading, and controls the STOCK EXCHANGEs, securities
related firms, and companies involved in the public issue of securities. As a part of these
functions, SEC monitors disclosure functions of the companies, timely holding of annual
general meetings by them, timely payment of dividends and timely issuance of allotment
letters and refund warrants by security issuers.
Since its inception in 1993, SEC plays a significant role in the securities market. A major
function of SEC is to curb the irregularities prevailing in the market. To control and raise the
efficiency of the market, SEC promulgated the following orders and regulations since 1993:
(a) Securities and Exchange Commission (stock broker, stock dealer and authorized
representative) Regulation 1994; (b) Securities and Exchange Commission (merchant banker
and portfolio manager) Regulation 1995; (c) Securities and Exchange Commission (mutual
fund) Regulation 1997; (d) Credit Rating Rules 1997; (e) Securities and Exchange
Commission (control of insider trading) Regulation 1995; (f) Public Issue Rules 1998; (g)
Right Issue Rules 1998; and (h) Depository Act 1999.
SEC issues/cancels registration certificates to stock dealers, brokers, merchant banks,
authorized representatives of members, and all intermediaries working in the securities
market. Market surveillance is an essential activity of SEC. It analyses the price fluctuations
in both Dhaka and Chittagong Stock Exchanges. As part of supervision and regulation of
markets and its intermediaries, SEC receives and takes initiatives to settle complaints against
stockbrokers and firms/companies and takes actions, including charging fines and issuing
warnings for detected irregularities. It also takes legal steps against the defaulting companies
and firms. Up to July 2001, a total of 53 law suits were filed against various companies for
violation of rules and regulations of SEC.
SEC conducts research on the dealing behavior in the securities market and regularly
publishes the findings. SEC has a number of informative publications, which includes Annual
Report of SEC, Quarterly Reviews and the SEC Parikrama (Bangla). It also periodically
publishes manuals and handbooks. To educate the investors and intermediaries SEC
implements some programmes including investors' training for corporate and individual
investors and training programmes for authorized representatives of the members of DSE and
CSE.
Act No.15 of 1993

An Act made to provide for the establishment of the Securities and Exchange
Commission
Whereas it is expendient to establish a commission by the name of Securities and Exchange
Commission for the purpose of providing for the protection of the interests of investors in
securities, the development of the securities market and for matters connected therewith or
ancillary thereto;

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Now, therefore, it is enacted as follows:-
1. Short title and commencement. - (1) This Act may be called the Securities and
Exchange Commission Act, 1993. (2) It shall be deemed to have come into force on
20th Vaishakh, 1400/3th May, 1993, respectively
2. Definitions. - (1) unless there is anything repugnant in the subject or context, in this Act-
a) "Commission" means the Securities and Exchange Commission established under section
3;
b) "Chairman" means the Chairman of the Commission;
c) "Fund" means the Securities and Exchange Commission Fund established under section
12;
d) "regulation" means a regulation made under this Act;
e) "rule" means a rule made under this Act;
f) "Member" means a member of the Commission;
g) "Permanent member" means a permanent member of the Commission.
(2) All undefined words and expressions used in this Act shall be applicable in the sense they
are used in the Companies Act, 1913 (VII of 1913), Capital Issues (Continuance of Control)
Act, 1947 (XXIX of 1947) and the Securities and Exchange Ordinance, 1969 (XVII of 1969).
2. Establishment of the Commission.- (1) As soon as may be after the commencement

of this Act, the Government shall, by notification in the official Gazette, establish a
Commission by the name of Securities and Exchange Commission for carrying out
the purpose of this Act.
3. (2) The Commission shall be a body corporate and shall have perpetual succession
and a common seal and shall have power to acquire, hold and transfer property, both
movable and immovable, and shall by its name sue and be sued.
4. Head office, etc. - (1) The Head Office of the Commission shall be at Dhaka.
(2) The Commission may, if necessary, with the approval of the Government, establish
branch offices at any place of the country.
5. Composition of the Commission. - (1) The Commission shall consist of the following
members, namely-
a) The Chairman;
b) Two permanent members;
c) one officer, not being in rank below a co-secretary, of the Ministry or Department of
Finance to be nominated by the said Ministry or Department;
d) one Deputy Governor to be nominated by the Bangladesh Bank from among the Deputy
Governors of the said bank.
(2) The Chairman and the permanent members shall be appointed by the Government and the
terms and conditions of their service shall, subject to the provisions of this Act, be settled by
the Government.
(3) The Government shall appoint one of the permanent members as the Vice-Chairman of
the Commission.

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(4) The Chairman and the permanent members shall be required to be experts in matters
relating to companies and the security market or to be experts in law, economics, the keeping
of accounts and other matters which are, in the opinion of the Government, necessary for the
Commission.
(5) The Chairman shall be the chief executive of the Commission.
(6) The Chairman and the permanent members shall hold their offices for a period of three
years beginning from the date of their appointment and shall be eligible for reappointment for
only one further such period: Provided that no person who has completed fifty years shall be
eligible for appointment to the office of the Chairman or of a permanent member or shall
continue in the office of the Chairman or of a permanent member.
(7) The Chairman and any permanent member may at any time before the expiry of the term
of their office resign their office by an advance notice of no less than three months addressed
to the Government:
Provided that the Chairman or, as the case may be, the permanent member shall discharge his
duties until the Government has accepted the resignation.
6. Disqualification of the Chairman etc. - (1) A person shall be disqualified for
appointment as, or for being, a Chairman or a permanent member, if-
a) He is an undischarged insolvent;
b) He is declared by a court to be of unsound mind;
c) He has been convicted for a criminal offence involving moral turpitude;
d) He, in the opinion of the Government, abuses of the status of his office in such way that
his continuance in office would be contrary to the public interest;
e) He holds the office of a director or officer of any company or institution.
(2) No measure under clause d) and e) of sub-section (1) shall be taken without giving
reasonable opportunity for showing cause to the Chairman or a permanent member.
7. Meetings of the Commission.- (1) The meetings of the Commission shall be held at such
times and places as may be determined by rules and shall, before that, be held at the times
and places decided by the Chairman.
(2) Three members including one permanent member shall form the quorum at a meeting of
the Commission.
(3) Every meeting of the Commission shall be presided over by the Chairman and, in his
absence, by the Vice-Chairman.
(4) All matters at a meeting of the Commission shall be decided by the votes of the majority
of the members present and, in the event of equality of votes, the person presiding shall have
a second or casting vote.
(5) No act or proceeding of the Commission shall be invalid or be called in question merely
on the ground of any vacancy in, or any defect in the constitution of, the Commission.
8. Functions of the Commission. - (1) Subject to the provisions of this Act and the
provisions of the rules, the functions and duties of the Commission shall be to ensure the
correct issue of securities, to protect the interests of investors in securities and to develop and
control the capital and security market.
(2) In particular and without prejudice to the generality of the provisions mentioned above,
such provisions may include any of the following matters, namely:-
a) the regulation of the stock exchange and of the business of any security market;
b) the determination and regulation of the work of stock brokers, sub-brokers, share transfer
agents, bankers and managers of issues, trustees of trust deeds, registrars of issues,

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underwriters, portfolio managers, investment advisers and such other intermediate institutions
as are connected with the security market;
c) the registration, regulation and management of any joint investment system including
mutual funds;
d) the development, supervision and control of authorized self-control organizations;
e) the stoppage of fraudulent and dishonest transactions relating to securities or the security
market;
f) the development of instruction relating to investments and the training of all intermediaries
of the security market;
g) the prevention of such dealings in securities as imply the misuse of privileges;
h) the acceptance of the shares or stocks and authorities of companies and the admission and
control of companies;
i) the stock exchanges issuing securities and their intermediaries and the calling for
information from self-control organizations of the security market, their supervision,
investigation and audit;
j) the compiling, analyzing and publication of statistics relating to the financial activities of
issuers of securities;
k) the imposition of fees or other charges, for carrying out the purposes of this section;
l) the carrying out of such research as may be required for the implementation of the purposes
mentioned above and the publication of information’s and data;
m) the discharge of such other functions and the performance of such other duties as may be
determined by regulations for carrying out the purposes of this Act.
9. Appointment of officers and employees. - (1) The Commission may, subject to such
directions as the Government may pass from time to time, appoint such number of officers
and employees as may be required for the proper discharge of its functions.
(2) The employment and conditions of service of the officers and employees of the
Commission appointed under sub-section (1) shall be settled by regulations.
10. Registration certificate.- (1) No stock broker, sub-broker, share transfer agent, banker of
issues, trustee of trust deeds, registrar of issues, underwriter, portfolio manager, investment
adviser and no other such intermediary connected with the security market may sell or deal in
any security otherwise than subject to regulations or the conditions of the registration
certificate received from the Commission: Provided that every person or stock broker, sub-
broker, share transfer agent, banker of issues, trustee of trust deeds, registrar of issues,
underwriter, portfolio manager, investment adviser and other such intermediary connected
with the security market who has been selling or buying securities immediately before the
establishment of the Commission may, for a period of six months or, if he has made an
application for registration, until the decision of the application, continue in his profession.
(2) Applications for registration shall be made in such manner and under payment of such fee
as may be determined by regulations.
(3) The Commission may, in such manner as may be prescribed by regulation, suspend or
cancel any registration certificate:
Provided that no order under this sub-section shall be made without giving reasonable
opportunity for hearing to the person or institute concerned.
11. Duties and responsibilities under Act XXIX of 1947 and Ord. XVII of 1969, etc. .-
Immediately after the establishment of the Commission-

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a) the expression "Controller of Capital Issues" in every Act other than this Act or every
agreement, instrument and document shall be deemed to have been substituted by the word
"Commission";
b) the office of the Controller of Capital Issues, if any, shall be abolished;
c) all the duties and responsibilities of the Government under the Capital Issues (Continuance
of Control) Act, 1947 (XXIX of 1947) and the Securities and Exchange Ordinance, 1969
(XVII of 1969), hereto after referred to as the said two Acts, shall be duties and
responsibilities of the Commission;
d) all agreements concluded and all matters settled by or with the Government under the said
two Acts shall be deemed agreements concluded and matters settled with the Commission;
e) all suits, cases and other legal proceedings filed by or against the Government under the
said two Acts shall be deemed filed by or against the Commission;
f) anything pending before the Government in accordance with the provisions of the said two
Acts shall be decided by the Commission in accordance with the provisions of the said two
Acts.
12. Fund of the Commission. - (1) There shall be a fund to the Commission to be called the
Securities and exchange Commission Fund and this fund shall consist of grants made by the
Government, grants made by local authorities or other institutions, any other sums received
by the Commission.
(2) The moneys of the fund shall be kept in the name of the Commission in any scheduled
bank approved by the Commission.
(3) The wages and allowances of the officers and employees of the Commission shall be paid
and the other necessary expenditures of the Commission shall be met with from the fund.
13. Annual budget statement.- The Commission shall every year, within such period as the
Government may direct, submit to the Government an annual budget statement for the
following financial year showing the amount of money which may be required from the
Government for the said financial year.
14. Accounts and audit. - (1) The Commission shall maintain its accounts properly and
prepare annual statements of accounts.
(2) The Controller and Auditor-General of Bangladesh, hereto after referred to as the
Auditor-General, shall every year audit the accounts of the Commission and shall send a copy
of the audit report to the Government and the Commission and the Government shall provide
for its presentation at the national assembly.
(3) For the purpose of an audit under sub-section (2), the Auditor-General or any person
authorized by him shall have access to all records, documents, cash and money deposited
with banks, securities, stores and other property of the Commission and may examine any
member, officer and employee of the Commission.
15. Reports, etc. (1) The Government may, if necessary, call for reports and statements from
the Commission on any matter of the Commission and the Commission shall be bound to
supply such reports and statements.
(2) The Commission shall, within sixty days after completion of every financial year, submit
to the Government a report together with the account-books on its activities during the
preceding financial year and the Government shall, as fast as possible, provide for its
presentation at the national assembly.

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16. Power of the Government to give directions. The Government may give the
Commission any direction for carrying out the purposes of this Act and the Commission shall
be bound to comply with such directions.
17. Delegation of powers.- The Commission may, subject to well-defined conditions,

delegate to the Chairman, any other member or any officer any of its powers or
responsibilities except the power to make regulations.
18. Punishment. - Whoever contravenes or intends to contravene or aids and abets to

contravene any provision of this Act shall be punishable with a term of imprisonment not
exceeding five years or a fine not exceeding five hundred thousand Takas or both.
19. Cognizance. - (1) No Court other than a Session Court shall take cognizance of any
offence under this Act.
(2) No offence under this Act shall be taken cognizance of except on a complaint in writing
made by the Commission or any person authorized by the Commission.
20. Offences by companies.- If the person contravening any of the provisions of this Act is a
company, the owner, director, manager, secretary or any other officer or agent of the
company shall be deemed guilty of the contravention of the provision, unless he proves that
the contravention was committed without his knowledge or that he exercised all due diligence
to prevent the contravention.
21. Appeal.- (1) Any person aggrieved by an order passed by any member or officer in
accordance with this Act, the rules or regulations may, within such period as may be
specified by regulation, prefer an appeal to the Commission against such order and the
decision of the Commission thereupon shall be final.
(2) No appeal filed after the expiration of the specified period shall be acceptable, but if the
appellant satisfies the Commission to the effect that there existed reasonable grounds for the
appeal not to have been filed within the specified period, the Commission may accept an
appeal filed after the expiration of the specified period.
(3) An appeal under this section shall be made in such form, and shall be accompanied by
such fee, as may be specified by regulation and shall be filed together with a copy of the
order against which it has been filed.
(4) Every appeal shall be decided on in such manner as may be specified by regulation; and
no appeal shall be decided on without giving reasonable opportunity for hearing to the
appellant.
(5) The Commission may, at its own instigation or in the light of any application, reconsider
any matter already decided upon and in this case the decision of the Commission shall be
final.
22. Protection of action taken in good faith. - No prosecution, suit or other legal
proceeding shall lie against the Government, any public officer or employee, any member,
officer or employee of the Commission for any damage caused or likely to be caused to any
person as a result of any action taken in good faith under this Act, the rules or regulations.
23. Exemption.- The Commission may, if it deems necessary or expedient for the
preservation of the public interests so to do, exempt any person or institute from the

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provisions of section 10 (1) under this Act regarding the selling and buying of securities or
any other matter connected therewith.
24. Power to make rules.- The Government may, by notification in the official Gazette,
make rules for carrying out the purposes of this Act.
25. Power to make regulations. - The Commission may, on prior consent of the
Government and by notification in the official Gazette, make such regulations as are not
inconsistent with the provisions of this Act or rules for carrying out the purposes of this Act.
26. Power to remove difficulties.- (1) If any difficulty arises in giving effect to the
provisions of this Act, the Government may, by order, take any measure for the purpose of
removing such difficulty:
Provided that no order under this section shall be issued after the expiry of five years from
the date on which this Act came into force.
(2) The Government shall, as fast as possible, present every order passed under this section at
the national assembly.
27. Repeal and savings. - (1) The Securities and Exchange Commission Ordinance, 1993
(Order No.3, 1993) stands herewith repealed.
(2) Notwithstanding such repeal, any action done or any measure taken under the repealed
Ordinance shall be deemed to have been done or taken under this Act.
Public Issue of Securities:

� “Public Issue” means public issue of security through initial public offering and repeat
public offering;
� “Initial Public Offering (IPO)” means first offering of security by an issuer to the general
public;
� “Repeat Public Offering” means further issuance of security through public offering by an
issuer which has raised capital through initial public offering earlier;
� “Prospectus” means any document prepared for the purpose of communicating to the
general public a company’s plan to offer for sale of its securities under these Rules.
Parties Involved
� Issuer;
� Investors- Local, NRB, Foreign;
� Issue Manager, Underwriter, Auditor, Banker, Trustee, Custodian;
� Credit Rating Company;
� Depository Company.
� Stock Exchange;
� Bangladesh Bank;
� Securities & Exchange Commission
General requirements for filing application
� Ten copies of draft prospectus

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� Any amendment to the prospectus
� All stock exchanges shall be supplied simultaneously by the issuer
� The audited financial statements of the issuer must be submitted to the Commission along
with the prospectus and that the said statements shall not be older than 120 days of the end of
the period for which they said financial statements is prepared.
3. Format and contents of the prospectus
A. Material Information
1. Financial statement of the company

- Assets & Liabilities (Balance sheet)
- Cash flow statement
- Profit & Loss Account
2. Additional disclosures.
B. Information to be contained in the Prospectus

� Name of the issuer company;
� Amount and type of securities being issued;
� Offering price of the securities on a per unit and aggregate basis;
� Opening and closing date of subscription including for NRBs;
� Names and address of the underwriter (s);
� Issue date of the prospectus;
� The statement “If you have any queries about this document you may consult issuer, issue
manager and underwriter”
Risk factors as per SEC (Public Issue) Rules, 2006
Immediately following the cover page of the prospectus, all risk factors and management’s
perception about the same are to be clearly stated which may include, among others,:-
(a) Interest rate risks;
(b) Exchange rate risks;
(c)Industry risks;
(d) Market and technology-related risks
(e) Potential or existing government regulations;
(f) Potential changes in global or national policies;
(g) History of non operation, if any; and
(h) Operational risks.
Other pertinent information

(1) Use of Proceeds
(2) Description of business
(3) Description of property

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(4) Plan of operation and discussion of financial condition
(5) Directors and Officers
(6) Involvement of Directors and Officers in certain legal proceedings
(7) Certain Relationships and Related Transactions
(8) Executive compensation
(9) Options granted to Officers, Directors and Employee
(10) Transaction with the Directors and Subscribers to the Memorandum
(11) Ownership of the Company’s securities
(12) Determination of Offering Price
(13) Market for the Securities being offered
(14) Description of Securities outstanding being offered
(15) Debt Securities
(16) Financial statement requirements
Fees for public offering and listing of security
� The following fees shall be applicable for payment by the issuer company:-
� Issue management fee: maximum 1% on the public offering amount or
Tk. 20 lac whichever is lower.
� Underwriting fee shall be calculated on 50% of initial public offer amount, and the said
amount shall not exceed 1% on the amount underwritten.
� Bankers to the issue fee: maximum 0.1% on the amount collected against public offering
applications.
Fees to be paid to the each stock exchange:

• Listing fee for ordinary shares:
� I. Up to Taka 10 crore of paid-up capital @ 0.25%.
� ii. Above Taka 10 crore of paid-up capital @ 0.15%.
• Listing fee for preferred shares and fixed income securities:

� I. Up to Taka 10 crore of size of the issue @ 0.25%.
� ii. Above Taka 10 crore of size of the issue @ 0.15%.
� However, the total listing fee shall be minimum of Taka 10,000 (ten thousand) and
maximum of Taka 20 lac for each of the categories
� Fees to SEC:
� (a) The issuer company shall pay Taka 10,000 (non-refundable) as application fee along
with the application for consent of the Commission to issue or offer of securities, by way of a
pay order or demand draft issued in favor of the “Securities and Exchange Commission”; and
� (b) upon according of consent by the Commission to issue prospectus, the issuer company
shall pay consent fee @ 0.15%, by way of a pay order or demand draft issued in favor of the
“Securities and Exchange Commission”, on the amount of public offering.
� No seal commission shall be paid to any person, including the members of the stock
exchanges.
Preconditions for making repeat public offering

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An issuer of a listed security may make repeat public offering, subject to compliance with the
following:-
� Information concerning the repeat public offering shall be disseminated as a price

sensitive information immediately upon Board decision as well as upon approval at the
general meeting and approval of the Commission, in accordance with the relevant
notifications issued by the Commission.
� there should be an explicit announcement while disseminating the information that the
repeat public offering shall be subject to approval of the Commission.
� Such offering and price thereof have been approved by the Board, the shareholders in a
general meeting, and the consent to which is obtained from the Commission.
� The proceed of either initial public offering or previous rights issue, as the case may be,
has been utilized fully and relevant reports were duly submitted to the Commission.
� Annual general meeting has been held regularly.
� The issue has been fully underwritten on a firm commitment basis by the underwriter.
� The financial statements of the issuer is prepared as per International Accounting
Standards (IAS) as applicable in Bangladesh, and audited as per International Standards of
Auditing (ISA) as applicable in Bangladesh.
� The issuer or any of its directors is not a bank defaulter.
Types of Securities & Rights of shareholders
Types of Shares
� Ordinary Shares
� Preference shares
Ordinary Shares/Stock
� Smallest unit of capital.

� Variable-income security since dividend is not specified and guaranteed and declaration of
which depends on board of directors.
� Dividends may be increased or decreased, depending on earnings.
� Represents equity or ownership.
� Includes voting rights.
� Priority: lower than debt and preferred.
� Bundle of shares is called stock.
Preferred/Preference Shares
� A hybrid security:
� It’s like common stock - no fixed maturity.
� Technically, it’s part of equity capital.
� It’s like debt - preferred dividends are fixed.
� Missing a preferred dividend does not constitute default, but preferred dividends are
cumulative.
� Priority lower than debt security but higher than ordinary shares.

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Preference Shares
� Cumulative preference shares

� Non-cumulative preference shares
� Redeemable preference shares;
� Non-redeemable preference shares;
� Convertible preference shares;
� Non-convertible preference shares;
� Participating preference shares;
� Non-participating preference shares.
Rights of Ordinary Shareholders as specified in Companies Act, 1994
� Right to request a copy of the M/A and a copy of A/A by paying taka fifty or lesser fee as
may be fixed by the company and company shall within fourteen days from the date of
request send the copy to the member.
� Right to get share certificates [S 175]
� Rights to get the shareholders name recorded in the register [Section 34];
� Right to inspect share register [S-41];
� Right to inspect instrument creating mortgages and company’s register of mortgages [S
175];
� Rights to have financial statements [S- 191] and rights to inspect audit report [S-216]
� Right to get notice of AGM and to participate in the AGM [S- 95];
� Right to select the board of directors [S- 91] and removal of the board of directors [ S-
106]; Right to select auditor [S-210];
� Right to requisition EGM by holders of not less than
1/10th of the issued share capital [S-84];
� Right to get the copy of minutes of AGM and board meetings upon payment of Tk. 10 for
every hundred words [S-89];
� Rights to have the gist of the contract or terms and conditions of the contract entered into
by the company [S-132];
� Rights to have further shares if the company decides to raise capital [S- 155];
� Rights to participate in major decisions i.e. change of object clause, increase of authorized
capital, reduction of capital, internal or external construction etc.
� Right to apply to the Govt. to appoint inspectors [S-
195];
� Right to appoint inspectors [S-207];
� Right to acquire shares of shareholders dissenting from any scheme of contracts approved
by the majority shareholders [S- 230];
� Rights of minority shareholder to bring to the notice of the court if affairs of the company
are being conducted in inappropriate manners [S-233];
� Rights to have residual assets in the event of liquidation of the company;
� Right to lodge case against the auditors, directors or officers of the company in the event
of their breach of the fiduciary responsibility;
� Right to take decision through special resolution to wind up the company compulsorily
through court [S- 241] for failure to hold statutory meeting, commence business within a year

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from incorporation, or suspends for whole year, fails to pay debt or number of members falls
below the minimum.
� Right to wind up company voluntarily meeting certain conditions;
� Right to attend in the final meeting as soon as the affairs of the company are fully wound
up;
� Right of the shareholders of the limited companies not to contribute any amount in the
event of winding up exceeding the amount, if any, unpaid on the shares;

Page 14
Bangladesh Capital Market
1. Bangladesh Capital Market:
Securities and Exchange Commission:
In a market economy securities market is a vehicle through which surplus fund is invested in
alternative investment opportunities. Robust capital marker plays pivotal role for
industrialization and economical development of a country. For increasing the depth and the
breadth of the markets attracting the investors is important. This happens only when investors
are confident that the securities markets are transparent and efficient. The Securities and
Exchange Commission was established on June 8, 1993 as a capital market regulator in
Bangladesh through the Securities and Exchange Commission Act, 1993 ( Act 15 of 1993).
The Commission ensures the compliance of capital market related laws, rules, regulations etc.
by the intermediaries and persons and institutions related with capital market. Basic laws of
capital market are as follows:
 Securities Act, 1920

 Securities and Exchange Ordinance, 1969
 Securities and Exchange Commission Act, 1993 and
 Depository Act, 1999
The Dhaka Stock Exchange (DSE):
The Dhaka Stock Exchange (DSE) was established in 1954, but its commercial experience
started in 1956. Due to nationalization policy trading activities of DSE remained suspended
during the post liberation period and resumed again in 1976.
DSE is self-regulatory not-for-profit organization. As a self-regulatory organization DSE

supervises the functions of listed companies. Administration of DSE is run by the Dhaka
Stock Exchange (Board and Administration) Regulations, 2000. The board of directors is
consists of 24 members, 12 directors are elected by the direct votes of DSE members and 12
directors are nominated by the elected members from the non-DSE members with the
approval of the commission. The Chief Executive Officer (CEO) of DSE is also a non-voting
director.
DSE hires the CEO of DSE which requires the approval. The CEO conducts the daily affairs
of DSE. Now there are 234 members in DSE of which 194 members are registered by the
SEC for conducting securities business. According to the rules every members must be a
corporate body. Transaction and transfer of most of the securities listed on DSE are now
executed in electric form. At present DSE expanded its-online trading activities into the
divisional and district towns of the country.

Page 15
The Chittagong Stock Exchange (CSE):
The Chittagong Stock Exchange (CSE) was set up in 1995. It is also a self regulatory not-for-
profit organization and its management structure is same as DSE. The Chittagong Stock
Exchange (CSE) started first on-line trading system in Bangladesh capital market in1998 and
it is carrying out trading activities from Dhaka, Chittagong, Sylhet, Rajshahi, Barishal,
Cox’s- Bazar and Khulna.
Compliance Officer:
As per the securities laws every intermediary institution has to designate an officer as
compliance officer whose responsibility is to ensure particular firms compliance with
securities laws. As a primary regulator, if an intermediary does not comply with the laws
properly the compliance officer has to report to the chief officer of the related intermediary. If
violation of securities laws continues then the compliance officer shall report to the
Commission.
Book Building Method:

Book Building Process of IPO is free pricing regime that values the performance of the
company, both past and future, keeping in minds its investment, earning forecasts, economic
scenario etc. The Commission is examining the possibility of introducing Book Building
System for IPO pricing on selected basis.
Trading of Securities in the Exchanges:

In DSE and CSE trading of securities are done through automated system. As a result volume
of transactions has increased substantially over the years. Now trading is done in the
following four market segments:
 Public Market
 Spot Market
 Block Market
 Odd-Lot market
O-T-C Market:
Securities and Exchange Commission (Over the Counter) Rules, 2001 was issued in
2002 under which securities de-listed from the exchanges and securities are not listed with
the exchanges but have been issued obtaining consent from the Commission could be traded.
CSE has provided the platform but this facility has not yet been used.
Settlement of Securities transactions in the Exchanges:

Mechanism of settlement of securities transactions is elaborately specified in DSE and
CSE settlement of Sock Exchange Transactions Regulations, 1998. it also categorizes the
securities into A, B, G, N and Z based on profitability, operation and failure to hold AGM
and sustaining loss that ultimately exceeds paid up capital. This categorization helps investors
to know about the fundamental and attractiveness of security.
During the FY 2006-2007, governance scenario of listed companies improved
remarkably. In this period number of A category companies increased and the number of “B”

Page 16
and “Z” category companies decreased and increased respectively which appears in the
following table:
NAME OF THE NUMBER OF NUMBER OF

CATEGORY COMPANIES COMPANIES
FY 2006-2007 FY 2005-2006
“A” CATEGORY 141 140

“B” CATEGORY 28 36
“G” CATEGORY 1 1
“N” CATEGORY 9 -
“Z” CATEGORY 94 92
Securities trading in Exchange through Borrowing:
In a Bullish market securities price continues to increase and investors may opt for investing
more than its own equity availing loans from the brokers. As per DSE/CSE
(Member’s Margin) Regulations, 2000 investors could invest more than his own resources
and help reaping profit from the bullish market.
Likewise supply of securities could also be increased through short sale mechanism. Short-
sale refers to selling of securities that the seller does not own. As per Stock Exchange (Short-
sale) regulations, 2006 any person with a securities borrowing arrangement could sell
securities without owning it. This mechanism helps increasing supply of securities and could
be a win-win situation for seller, lender and brokerage firms.
Bond Market:
The capital market of Bangladesh mainly depends on equity securities. At present there are
eight listed debentures in DSE with an issued amount of Tk.140 Million. Bangladesh
government issues five-year and ten-year maturity government bond under the Bangladesh
Government Treasury Bond Rules, 2003. These bonds are transferable and are now are traded
on O-T-C basis. In order to popularizing the government bond and increasing the depth of
market secondary market trading was allowed in stock exchange with effect from 1 January,
2005. As on 30 June 2007, 44 government treasury bonds were listed in DSE. Due to
multifarious reasons secondary market trading could not be popularized. However, a decision
has been taken to form a committee consisting representatives of SEC, Bangladesh Bank,
NBR and Finance Division, Ministry of Finance to suggest measures to overcome the
bottleneck and develop the bond market in Bangladesh.
Corporate Governance Guidelines:
The Commission has issued “Corporate Governance Guidelines” on February 2006, on

comply or explain basis, to elevate corporate governance scenario in Bangladesh. These
guidelines, among other things, set the size of the board (5-12), require appointment of
independent director, company secretary, chief financial officer (CFO) and head of internal
control department. The guidelines also emphasized that the Chairman and CEO preferably

Page 17
be separate person. The guidelines require that compliance status of individual requirement
should be included in the annual report. During the FY 2006-2007, the financial statements
submitted to the commission by the issuer companies examined and found that the expected
benefit has derived through compliance of the said guidelines by the issuer companies. The
commission ensures the compliance of the said guidelines.
Derivatives:
At present there exists no rule for trading of derivatives products. CSE is now imparting
training on derivative products. The commission would soon frame rules under which
derivative instruments could be traded and settled.
Foreign Portfolio Investment:
Excepting few reserved sectors, 100% investment in any company can be made by any
foreign investors in Bangladesh. Foreign investors enjoy the similar facilities as enjoyed by
the Bangladeshi investors as per Foreign Investment (Promotion and Protection) Act, 1980.
However, they have to comply with the foreign exchange regulations of Bangladesh Bank.
During the FY portfolio investment by the non-resident Bangladeshis was worth of TK.
8359.20 million which was TK. 2420.60 million during the last financial year. Details of
portfolio investment by the non-resident Bangladeshis have been depicted in the Annexure 10
and 11.
SEC Advisory Committee Meeting Held:
The meeting of Advisory Committee of SEC was held on 28 February, 2007. The meeting
was chaired by Faruq Ahmed Siddiqi, Chairman, SEC. Among others representatives of ICB,
CDBL, BAPLC, BIDS, DCCI, BLFC, stock exchanges and Ministry of Finance were present
in meeting. The members of committee have suggested a lot of suggestions about the
development of capital market. The meeting dwelt on increasing the supply of good securities
including mutual funds, offloading the shares of profitable government owned companies,
expansion of bond market, ensuring the compliance of corporate governance guidelines,
taking initiative to attract the non-resident and foreign investors etc.
Seminar on “Credit Rating and Capital Market Development”:
The Securities and Exchange Commission and The Standard Chartered Bank, Bangladesh
jointly organized a seminar on “Credit Rating and Development of Capital Market” on
September 6, 2006. The Bangladesh Bank Governor Salehuddin Ahmed, SEC Chairman
Faruq Ahmed Siddiqi, CEO of SCB-Bangladesh Osman Morad and Managing Director of G3
Capital Markets of SCB Mahdur Mehta spoke on the occasion. The SEC Chairman said that
the credit rating agencies should be independent and unbiased in their evaluation and
maintain transparency, independence and objectivity to ensure protection of creditors’ right.

Page 18
Introduction of Internet Balance Enquiry Option for Beneficiary Owners (BO) Account
of CDBL Introduced:
The Securities and Exchange Commission Chairman Faruq Ahmed Siddiqi inaugurated the
Global Internet Balance Enquiry Option of Central Depositary Bangladesh Ltd. (CDBL) on
August 9, 2006. Under the facility of BO account holder can look at the status of his/her
account as well as get the printout of all the information of that account paying only Tk. 200
annually.
Visit of National Defence College Team:
A delegation consisting of 47 participants from the National Defence College visited SEC on
22 May, 2007.High officials of SEC made presentations on the regulatory framework of
capital market, role of activities of SEC, scenario of capital market, depository system and
surveillance system of SEC. The team appreciated the role of SEC in developing the capital
market.
2. CORPORATE FINANCE
The Corporate Finance Department (CFD) supervises and monitors the listed companies after
issuance of primary shares in light with the securities laws. CFD ensures holding of AGM on
time as specified in securities laws. Payment of declared dividend to the investors within
stipulated time, examines the audited annual financial statements and un- audited half yearly
financial statements as part of its supervision.
CFD has strengthened and expanded its monitoring during the financial year. The
Department watches audiovisual recording of holding of AGM by the issuer companies.
Explanation Is called from the issuer companies who made irregularities in holding AGM
such as transaction business in AGM within very short limo without allowing effective
participation of investors, avoiding queries raised by the shareholders, submitting edited
audio-visual recording instead of uninterrupted recording of procedures of meeting etc. If the
explanation was not found satisfactory, enforcement actions against the defaulted companies
are taken.
The audited financial statements of the issuer companies are examined in order to ensuring
the issuers have prepared them in accordance with the securities related rules and IAS and the
auditors have audited/issued audit report in accordance with IAS. Due to aforesaid efforts and
actions, financial statements of the issuer companies became more transparent. It has also
been observed that some statutory auditors of listed securities issued qualified opinion in their
report about the affairs of the issuers and the way financial statements have been prepared. It
is worth mentioning that the Commission warned some companies on the basis of qualified
opinion mentioned n their auditor’s report and initiated enforcement actions against some
companies as well.

Page 19
The supervision activities of CFD also strengthened concerning payment of declared
dividend on time by the issuer companies. As a result, tendency of non/delayed-payment of
declared dividend by the companies has been reduced to a great extent.
3. REGISTRATION
All market intermediates associated with the capital market are required to be registered by
the SEC which help Commission to discharge Its oversight functions more effectively.
Issuance and Renewal at Stock Broker/Dealer Registration Certificate:
During FY 2006-2007, registration certificate issued to 21 members of stock exchanges to act

as stock broker and renewed 181 member’s registration certificates to operate as stock
broker/dealer under Securities and Exchange Commission (Stock Dealer. Stock Broker and
Authorized Representative) Rules. 2000.
Issuance and Renewal of Authorized Registration Certificate:
The authorized representative registration certificates were issued in favor of 487 applicants
and renewed 75 authorized registration certificates by the Registration Department.
Issuance and Renewal of Depository Participant Registration Certificate:
During the said period, the Commission Issued 26 and renewed 151 depletory participant
registration certificates under Depository (User) Regulations, 2003
Mutual Fund:
In Bangladesh mutual funds as well as any form of collective investment scheme is required
to be registered by the SEC under Securities and Exchange Commission (Mutual Fund)
Rules, 2001 To register a mutual fund four part are required viz, sponsor, asset management
company (AMC), trustee and custodian. Sponsors provide the seed money and appoint asset
management company, custodian and trustee. They also draft trust deed as per the stipulation
of Trust Act, 1882, get It vetted by the SEC and registers the trust deed under Registration
Act, 1908. AMC, Custodian and Trustee must be registered with SEC in order to discharging
their respective functions.
AMC lakes the investment decision of the mutual fund in accordance with the objectives of
the mutual funds, coding holds the security and trustee ensures whether AMC and custodian
have been acting in adherence to the trust deed and requirements of Securities and Exchange
Commission (Mutual Fund) Rules, 2001 AMC has to comply with investment restrictions
imposed by the Commission.
Till now the Commission issued Asset Management Registration Certificate in favor of ICB
Asset Management Company Ltd. and Asset and Investment Management Services of
Bangladesh Ltd to perform as AMC. Up to June 30 2007 the Commission Issued registration

Page 20
certificate in favor of investment Corporation of Bangladesh (ICR), Bangladesh General
insurance Company (BOIC) and Grameen Fund to perform as Trustee. In the aforesaid period
the Commission approved the trust deed of ICR AMCL First NRB Mutual Fund (c1osed-end)
under the concerned rules. During the said period the Commission made a requirement for
AMC to appoint compliance offer also. At present 14 closed-ends mutual fund (including two
mutual funds that are managed by private sector Asset Management Company [AMC]) which
are listed on the stock exchanges. Apart from the aforesaid closed-end funds there are three
open-end mutual funds.
Merchant Bank:
Merchant bank plays a significant role as an intermediary in the capital market. In

Bangladesh they carry out issue management, underwriting and portfolio management
function. Under Securities and Exchange Commission (Merchant Banker and Portfolio
Manager) Rules, 1996, till the end of June 2007, the Commission issued registration
certificates in favor of 29 companies to perform as merchant bankers Among 29 merchant
bankers, 22 operate as Issue Manager, Underwriter, and Portfolio Manager, 6 as Issue
Manager and 1 as Portfolio Manage
Credit Rating Company:
Credit Rating Companies Rules, 1996 requires mandatory rating of all forms of corporate
debt securities, rights share and issue of shares at premium. Credit Rating Company
expresses its opinion through rating scales considering the Probability of the issuers, ability to
make timely repayment of principal and servicing of Interest. Asset-backed securities also
required to be credit rated. Bank has made rating of banks and financial institutions
mandatory.
Credit rating plays an important role to take investment decision. Credit rating reflects the
real status of a company including company’s financial status and management efficiency.
The Commission issued registration certificate in favor of Credit Rating Information and
Services Ltd (CRISL) and Credit Rating Agency of Bangladesh Ltd (CRAB) to operate as
credit rating agencies under the Credit Rating Companies Rules, 1996 The Commission
directed said companies to comply with the code of conduct prepared by International
Organization of Securities Commission (IOSCO) to carry out rating activities with
transparency. The commission also made mandatory for the credit rating companies to have
compliance officer for ensuring compliance with securities laws.
Trust of Ant Backed Security Issue:

To act as the trustee of asset-backed security, registration is required under Securities and
Exchange Commission (Asset-Backed Security Issus) Rules 2004. During the period under
review, the Commission issued registration certificate in favor of Bangladesh General
insurance Company and Eastern Bank Ltd. to act as trustee of asset backed security. The
Commission also made mandatory to have compliance officer by the trustee. It is worth
mentioning that till the end of 2007 the Commission issued registration certificate in favor of
investment Corporation of Bangladesh (ICB), Bangladesh General Insurance Company
(BGIC) and Eastern Bank Ltd. under a rules to perform as trustee of asset backes security

Page 21
Issuance of Security Custodian Registration Certificate:
Registration is required under the Securities and Exchange (Security Custodial Service)
Rules, 2003 to act as a security custodian. The Commission issued security custodian
registration certificate to Standard Chartered Bank, Honk Kong Shanghi Banking
Corporation and Dhaka Bank Ltd. During the period the Commission issued security
custodian registration certificate in favor of South East Bank Ltd, Arab Bangladesh Bank Ltd.
and IOLC of Bangladesh.
Trustee of Mudaraba Perpetual Bond Issue:

Securities and Exchange Commission has accorded permission to Investment Corporation of
Bangladesh (ICB) to act as trustee for the Tk. 3000.00 million Mudaraba Perpetual Bond of
Islamic Bank Bangladesh Ltd.
Securities are listed on the stock exchanges by the following way as per existing securities
rules.
• Through initial Public Offering (IPO) as per the Securities and Exchange Commission
(Public issue) Rules, 2006.
• Through direct listing under the DSE/CSE Direct Listing Regulations, 2006.
• If the Commission considers that listing of certain security is necessary or expedient
in the public interest, then it directs under section 10 of Securities and Exchange
Ordinance, 1969 the stock exchanges to list it.
Public issue route is exercised by the companies that require additional capital, direct listing
is availed of by the companies whose existing shareholders want to dispose of whole or part
of their shareholdings and the lest method is applicable to those companies that are not
willing of their own or the stock exchange is not willing to list but the Commission feels
expedient to do so.
During the period under review, 9 companies and 1 mutual fund were listed with DSE and 4
companies were listed with CSE details of which are given in the following table:
Name of the Issuer Date of Listing Issued Capital (taka in

DES CSE Million)
PGCB (Direct Listing) 9.10.06 3643.60
Lanka Bangla Finance Ltd. 18.10.06 350.00
Bangladesh Industrial Finance 9.11.06 163.30
Company Ltd.
IPDC Ltd. 30.11.06 31.12.06 61.70
Brac Bank Ltd. 23.01.07 31.01.07 1000
Prime Islami Life Insurance co. 12.2.07 75.00
Ltd.
ICB AMICL first NRB mutual 21.3.07 1871.60
Fund
Premier Bank Ltd. 21.3.07 100
Golden Son Ltd. 23.05.07 27.5.07 1690.00
Total 20.5.07 22.5.07 250.30

Page 22
9760.80
Comparative picture of security listing on the exchange during the last few years are as
FY Number of Issuer Companies
DSE CSE
2006-07 9 4
2005-06 19 7
2004-05 5 4
2003-04 10 10
2002-03 3 3
Total 46 28
follows:
Graphical presentation of securities listing in DSE and CSE:
50 46
45
40
35
30 28
Num ber of Is s uer Com panies D
25
19 Num ber of Is s uer Com panies C
20
15
9 10 10
10 7
4 5 4
5 3 3
0
2006-07 2005-06 2004-05 2003-04 2002-03 Total

Page 23
4. SURVEILLANCE
Surveillance of Securities Transactions:
To ensure investor protection and safeguard the integrity of the markets, the Commission has
a comprehensive surveillance system. Stock exchanges are the primary regulars for detection
of market manipulation, price rigging and other regulatory breaches. SEC keeps constant
vigil on the activities of stock exchanges to ensure effectiveness of the surveillance system.
SEC watches the market surveillance through On-line and Off-line surveillance system.
Inspection and Investigation:
The Surveillance Department of the Commission conducts on-line and off-line market
surveillances system to find out violation of securities related laws in securities trading and
also to find out any irregularities and abnormalities in securities transactions. As a part of on-
line surveillance, the surveillance software and, at the end of daily transactions on the
exchanges, prepares a report containing summary of daily securities transactions and
abnormal trading, if any. On the other hand, as a part of off-line surveillance, the surveillance
officers analyze the information that is collected earlier through using the Commission’s off-
line surveillance software (SECAS). If detailed investigation is needed the Department
proposes to the Commission to constitute an enquiry committee. If any violation of securities
laws was found in the enquiry report then it is sent to the Enforcement Department for taking
necessary action.
Besides supervising the depository participants activities the Commission has further
strengthen its surveillance activities by daily market monitoring, supervise visits and regular
monthly inspection of stock broker/stock dealer offices. As a result, the interest of investment
in the capital market among the small investors and confidence of all investors in general has
been increasing side by side the regular activates in future surveillance Department will play
a significant role through improving surveillance system of capital market with the help of
Asian Development Bank (ADB).
Insider Trading:
Insider trading and related price manipulation creates huge distortions in the market place,
transferring value to insiders at the expenses of general investors. If insiders take advantage
of non-public information they actually profit in the expenses of minority shareholders. SEC
has issued Securities and Exchange Commission (Prohibition of insider trained) regulations,
1995. Under the said rules, issuer companies have to disseminate price sensitive information
to the stock exchanges and SEC within 30 minutes of taking decision of knowing the
information and are required to publish the said information in daily newspaper.
5. SUPERVISION AND REGULATION OF MARKETS AND INTERMEDIARIES

(SRMI)
SRMI Department of the SEC supervises wheather capital market related intermediaries
including stock exchange are doing their functions according to securities laws. Besides this
the said department also resolved the companies received against issuer companies under the
securities laws. The functions of SRMID are enumerated below:

Page 24
 Monitoring the declarations of sales/purchase /transfer of securities by the
sponsor/director of the listed company.
 Monitoring the position of monthly shareholding of sponsors/directors.
 Monitoring disclosure of price sensitive information of listed companies.
 Approval of share transfer of listed companies out of stock exchanges.
 Monitoring the activities of stock exchanges excepting securities transactions.
 Receiving and addressing of complaints on any activities of the issuer and
intermediaries of capital stock market.
During 2006-2007 the following types of complaints were lodged with the Commission and
measures taken by the Commission:
Complaints Against listed Companies:
Nature of Received During Under Process Referred for Resolved

Complaints 2006-2007 Enforcement
Action
Nonpayment or 38 1 10 27
delay in
payment of
dividend
Nonpayment of 5 ------- 4 1
debenture
installment
Transfer of 10 ------- 4 6
shares
Non-receipt of 7 1 ------- 6
letter of rights
share
Non receipt of 3 ----------- --------- 3
bonus share
Non receipt of 6 ---------- --------- 6
annual report
Refund warrant 6 ---------- ---------- 6
Non-demand of 3 ---------- ------ 3
shares
Miscellaneous 25 1 24
Total 103 2 19 82

Page 25
Complaint against Stock Broker / Dealer:
Nature of Received During Under Process Referred for Resolved
Complaints 2006-2007 Enforcement
Action
Non delivery of 2 ----- ----- 2
shares
Nonpayment of 4 ----- ----- 4
clients money
Transfer of 3 ----- ----- 3
shares in the link
BO account
Miscellaneous 6 1 1 4
Total 15 1 1 13
6. CENTRAL DEPOSITORY SYSTEM (CDS)

Depository Act. 1999 has legitimized electronic registry of securities. These legislations have
substantially changed laws, which govern the ownership, transfer and pledge of securities.
Now, the records of the securities issued are maintained in the Central Depository
Bangladesh Ltd (CDBL). in order for smooth operation of central depository the aforesaid act
has bestowed adequate authority on the Commission to monitor the administration of the
CDBL along with fixing the various fees of the depository company through issuance of
regulations. After the introduction of electronic registry of shares through CDBL
transparency in securities issuance, trading and settlement have been increased significantly
and settlement period of securities transactions has also been reduced.
CDS department exercise oversight on the functions of Central Depository Bangladesh Ltd
and Depository Participants (DP), functions of converting physical share certificates of listed
companies into dematerialized from , supervises the issuance of securities in dematerialized
into dematerialized form, supervises the issuance of securities in dematerialized form ,
transfer and all other activities concerning securities transaction under the Depository Act,
1999, issues Directives , Order Concerning CDS.
During July 2006 –June 2007, the following 14 companies have joined Central Depository
Bangladesh Ltd.(CDBL). At the end of this period the total number of companies and Mutual
Fund under CDBL stands at 118. In DSE transfer and trading of most of the securities are
now done in automated system dematerialized form.
SL No. Names of the Company Joining Date

1 BD Com. On line Ltd 24 July 2006
2 Power Grid Comapany of Bangladesh Ltd. 9 October 2006
( Direct Listing)
3 Lanka Bangla Finance Ltd ( IPO) 1 November 2006

4 Bangladesh Industrial Finance Co. (IPO) 15 November 2006

Page 26
5 IPDC of Bangladesh ( IPO) 3 December 2006
6 Beximco Sinthetix Ltd. 21 January 2007
7 Brac Bank Ltd. (IPO) 23 January 2007
8 Prime islami Life Insurance (IPO) 14 February 2007
9 Keya Detergent Ltd. 14 February 2007
10 Shahjalal Islami Bank Ltd. 28 March 2007
11 ICB first NRB Mutual Fund (IPO) 28 March 2007
12 Uttara Bank Ltd. 10 May 2007
13 United Insurance Co. Ltd. 22 May 2007
14 Golden Son ltd. (IPO) 22 May 2007
15 The Premier Bank Ltd. (IPO) 27 May 2007
16 First ICB Mutual Fund. 20 June 2007
17 Second ICB Mutual Fund 20 June 2007
18 ICB AMCL first Mutual Fund (IPO) 20 June 2007
7. Enforcement
Administrative Sanction and Penalty:
Under the securities laws the commission in empowered to impose administrative sanctions
and also to impose penalties. Prior to taking measures, SEC follows due process that includes
carrying out inspection and enquiry. If in the enquiry it is found that the punitive measures
should be taken against the person against whom enquiry inspection was conducted, a show
cause notice is issued and if response to the show cause notice is not satisfactory, the accused
person is provided with an opportunity of being heard and finally, on the basis of severity of
violation the commission either imposes administrative sanctions or impose penalty or both.
As per securities law minimum penalty, if commission decides to impose is Tk. 1.00 lac and
maximum is unlimited.
A brief description of activities of the enforcement department during the FY 2006-2007 is

furnished below:
Issuer Company:
The commission imposed penalty on the directions of 32 companies for violation of securities
laws like-non submissions of half yearly and yearly financial statement failure in holding
annual general meeting, buying and selling of share through insider trading, financial
statements not audited by the statutory auditor as per scurrilities law , non disclosure of price
sensitive information etc.
During the said financial year, the commission issued warning letters to 117 companies for
non compliance of securities law viz: delay in submission of half yearly and yearly financial

Page 27
statements, failure in holding annual general meeting, failure to pay dividend, showing
reserve by overvaluing fixed asset of companies, non compliance with securities laws in IPO
shares distribution to comply with the said laws in future.
Besides, the commission issued directive to one issuer company for submitting the annual
accounts statements being audited by the partnership firm under the section 12(3) of
Securities and Exchange Rules , 1987 as year ended on June 30, 2005.
The above actions are enumerated below in a table.
Nature of Legal Actions Number of Companies Number of Companies

Penalty 32
Directives 1
Warning 117
Stock Broker/ Dealer/ Merchant Banker/ Authorized Representative / issue Manager:
The Commission imposed penalty upon 6 brokerage houses for fating to comply me
securities laws like- non compliance of sale order of clients, for not reserve the consolidate
bank account and transfer shares from one BO to another BO without Commission consent,
to permit short-sale, failure to submit the share trading statement, transfer! Exchange off-
exchange of shares without consent of the proper authority.
The Commission issued warning letters tol5 stock broker/ dealer / merchant banker/
authorized representative /Issue manager for failing to comply with the different securities
related laws- concerning lottery of allotment of IPO share. Short-sale, failure to complete all
shares sales within 30 working days according to the declaration of directors’ shareholders
and failed to reserve clients buy/sell order. Stock leisure and margin agreement and instructed
them to comply with the securities related rules in future. A summary of above actions m
furnished in the following table:
Nature of Legal Action Number of Company / Person

Penalty 6
Directives -
Warning 15
Depository Participants:
Besides the Commission issued warning letters to three Depository Participants and also
instructed them to comply with the securities related rules in future.

Page 28
List of Enforcement Actions for the Month of April & May 2010
Sl Date Subject
No
01 20/04/2010 Warning to concerned of Thea Securities Ltd due to non-compliance of
regulations 4(1) of the “Dhaka Stock Exchange (Short Sale)
Regulations, 2006
02 20/04/2010 Warning to concerned of Kazi Shoeb Rashid Capital Ltd due to non-
compliance of regulations 4(1) of the “Dhaka Stock Exchange (Short
Sale) Regulations, 2006
03 20/04/2010 Warning to concerned of Hedayetullah Securities Ltd due to non-
compliance of regulations 4(1) of the “Dhaka Stock Exchange (Short
Sale) Regulations, 2006
04 20/04/2010 Warning to concerned of Securities Broking & Management Services
Ltd due to non-compliance of regulations 4(1) of the “Dhaka Stock
Exchange (Short Sale) Regulations, 2006
.05 20/04/2010 Warning to concerned of Shyamol Equity Management Ltd due to non-
compliance of rule 3(2) of Margin Rules, 1999 and regulations 4(1) of
the “Dhaka Stock Exchange (Short Sale) Regulations, 2006
06 20/04/2010 Warning to concerned of Al-Muntaha Trading Co. Ltd due to non-
compliance of rule 3(2) of Margin Rules, 1999 and regulations 4(1) of
the “Dhaka Stock Exchange (Short Sale) Regulations, 2006
07 20/04/2010 Warning to concerned of Sharp Securities Ltd due to non-compliance of
regulations 4(1) of the “Dhaka Stock Exchange (Short Sale)
Regulations, 2006
08 20/04/2010 Review of imposed penalty against SEC penalty Orders
No.SEC/Enforcement/723/2004/218-221 all dated February 23, 2010 in
connection with the non-submission of audited financial statements for
the year ended on June 30, 2009 (Khaza Mosaic Tiles & Stone
Industries Ltd)
09 21/04/2010 Ordered to concerned of Bangladesh Zipper industry Ltd.
10 22/04/2010 Show-cause cum hearing notice: Non-compliance of the SEC
Notification No. SEC / CMRRCD / 2009-193 / Admin / 03-31 dated
June 01, 2009 (Alpha Tobacco Ltd)
11 22/04/2010 Show-cause cum hearing notice: Non-compliance of securities related
laws (Arafat Securities Ltd)
12 22/04/2010 Order to Bangladesh Luggage Industry Ltd
13 25/04/2010 Order to Bangladesh Leaf Tobacco Co. Ltd
14 27/04/2010 Order to M/s Mowla Mohammad & Co
15 29/04/2010 Warning to concerned of Progressive Life Insurance Co. Ltd due to
non-compliance of securities laws: Non-Compliance of SEC
Notification No. SEC / SRMID / 2000-953 / 313 Admin-06 dated
25.03.2001

Page 29
List of Enforcement Actions for the Month of May 2010
Sl Date Subject
No
01 04/05/2010 Warning to Concern of PFI Securities Ltd due to Non-compliance of SEC
Directive No. SEC/CMRRCD/2001-43/15 dated February 03, 2010, under
the margin ruals, 1999
02 05/05/2010 Reschedule of hearing to Khaza Mosaic Tiles & stone Industries Ltd. In
connection with non-submission of half yearly financial statement for the
period ended on Dec 31, 2009
03 09/05/2010 Warning to Concern of Power Grid Company Of Bangladesh Ltd due to
Non-compliance with the securities laws in connection with auditor's
qualifications on the audited financial statement for the year ended on
June 30, 2009
04 10/05/2010 Warning to Concern of Bangas Ltd due to Non-compliance with the
securities related laws in connection with retention of auditor for a
consecutive period exceeding three years
05 10/05/2010 Warning to Concern of Tallu Spinning Mills Ltd due to Non-compliance
with the securities related laws in connection with retention of auditor for
a consecutive period exceeding three years
06 10/05/2010 Warning to Concern of Metro Spinning Ltd due to Non-compliance with
the securities related laws in connection with retention of auditor for a
consecutive period exceeding three years
07 10/05/2010 Warning to Concern of Mithun knitting and Dyeing (CEPZ) Ltd due to
Non-compliance with the securities related laws in connection with
retention of auditor for a consecutive period exceeding three years
08 10/05/2010 Show cause cum hearing notice: To JKC Securities Ltd. due to Non-
compliance with securities related laws regarding enquiry report
conducted by SEC vide Commission's Order No. SEC/Surveillance/2009-
0561/182 dated Dec 03, 2009
09 10/05/2010 Show cause cum notice for hearing: To Arafat Securities Ltd. Due to Non-
compliance of securities related laws regarding enquiry report conducted
by SEC vide Commission's Order No. SEC/Surveillance/2009-0561/182
dated Dec 03, 2009
10 10/05/2010 Show cause cum notice for hearing: To Azam Securities Ltd. Due to Non-
compliance of securities related laws regarding enquiry report conducted
by SEC vide Commission's Order No. SEC/Surveillance/2009-0561/182
dated Dec 03, 2009
11 13/05/2010 Warning to Concern of Eagle Star Textile Mills Ltd due to Non-
compliance of securities laws in connection with non-submission of half
yearly financial statement for the half year ended on Dec 31, 2009
12 17/05/2010 Warning to Concern of Alpha Tobacco Ltd due to Non-compliance of
SEC Notification No. SEC/CMRRCD/2009-193/Admin/ 03, 31 dated
June 01,1999
13 17/05/2010 Warning to Concern of Grameenphone Ltd due to Non-compliance with
securities related laws in connection with the un-audited (forth quarter)
financial statements for the year ended on Dec 31, 2009
Page 30
14 20/05/2010 Warning to Concern of Perfume Chemical Industry Ltd due to Non-
compliance of securities laws in connection with non-submission of
capital shareholding position for the month of December 2009 and
January 2010
15 20/05/2010 Order to Rashpita data management & telecommunication Ltd. Order No.
SEC/Enforcement/371/2005/448-449
16 26/05/2010 Show cause cum notice for hearing: Non-compliance of securities related
laws to Lanka Bangle Finance Ltd.
17 30/05/2010 Show-cause cum notice for hearing: to Ever Smart Bangladesh Ltd. In
connection with the matter of non-compliance of conditions imposed
under 2CC of Securities & Exchange Ordinance, 1969 in the
Commission's consent letter No. SEC/CI/CPLC (pvt.)-186/2009-262
dated November 25,2009
18 30/05/2010 Show cause cum hearing notice: To Beach Hatchery Ltd. In connection
with Non-compliance with securities related laws in connection with issue
of right share
.19 31/05/2010 Order to Patro Synthetic Products Ltd. Order No.
SEC/Enforcement/738/2008/467 to SEC/Enforcement/738/2008/471
20 31/05/2010 Order to Bionic See Food Export Ltd. Order No.
21 31/05/2010 Order to Sreepur Textile Mills Ltd. Order No.
8. CAPITAL MARKET REGULATORY REFORMS AND COMPLIANCE (CMRRC)

Drafting of conditions, Directives, rules and regulations for consideration of the Commission,
proposing amendment to securities laws, suggesting reform measures on capital market
providing opinion & comments on proposed laws, rules, other jobs assigned by the
Commission are clone by the CMRRCD.
During 2006-2007. The following notifications/orders were issued by the Commission
SL Notification / Order No. and Contents of the Classification

No Date Notifications /
Orders
1 SEC / CMRRCD/2006-I59 / Amendment of Notification
Admin-01/28 Securities and
Date : 5th April 2007 Exchange
Commission
(Merchant Banker
and Portfolio
Manager)
Regulations, 1996

Page 31
2 SEC / CMRRCD/2006-I59 / Concerning Notification
Admin/03/26 amendment of the
Date : 16th May 2007 depository (User)
regulation 2003 on
27 September 2006.
3 SEC / CFD/4018 / 99/3151 Regarding extension Order

Date :17th May 2007 of time for Order
submitting the
audited financial
statements oh listed
life insurance to the
Commission and
stock exchanges in
terms of the appeal
of Bangladesh
insurance
Association,
4 SEC / CMRRCD/2006-I59 / Amendment o Notification

Admin/03/25 Securities and
Date : 26th November 2007 Exchange
Commission (Stock
Dealer, Stock Broker
, and Authorized
Representative
Regulation 2000.
LAW
Functions of Law Department are as follows:

 Assisting the lawyers appointed by the Commission to defend the court cases filed by
SEC or against SEC.
 Giving legal opinion on different issues sent by other departments of the Commission.
 To file and conduct certificate cases to recover penalty imposed by the Commission.
Total 156 cases filed by SEC or against SEC are pending in different Courts.
9. RESEARCH AND DEVELOPMENT

Page 32
Research and Development Department of the Commission conducts investors’ education
program for the general Investors, Impart capital market related seminar for various
government and non-government organization, prepare and publishes Commission’s various
publications regularly and furnishes various reports and Information to the Government and
other Institutions Including Ministry of Finance and different regulatory authorities.
During July 2006 - June 2007, Research and Development Department has published the
following publications of the Commission
Publications:
Annual Report: FY 2005-2006
Quarterly Review: Four issues during April 2006 -March 2007
“SEC Parikrama” (SEC’s Bangla Newsletter): Four issues during June 2006-March 2007
Education Program:
During the FY 2006 -2007 the Securities and Exchange Commission conducted 24 Investor’
Education Programs. Two programs in each month (each program of two days) were
conducted on regular basis. High officials of SEC highlighted on various Issues le the capital
market related laws, rules/regulations, surveillance system, depository system, rights of
shareholder etc. A total number of 463 Investors participated in the programs. Besides, in
order to encourage the Investors and to create awareness to capital market SEC also
conducted Investors’ Education Program jointly with OSE and ICB in Barisal and Khulna
during 28 -29 April, 2007 where more than 500 Investors participated.
During the period SEC organized the training programs for the authorized representatives of
members of DSE and CSE. 123 and 20 authorized representative from DSE and CSE
respectively participated in the said program.
10. CAPITAL ISSUE
Every company, whether incorporated in Bangladesh or not is required to take consent of the
commission to make an issue of capital in Bangladesh, make any public offer of securities for
sale in Bangladesh and renew or postpone the date of maturity or repayment of any security
maturing for payment in Bangladesh. Securities and Exchange Commission accords consent
to raise capital under the following Rules:
Securities and Exchange Commission (Issue of Capital) Rules, 2001

Securities and Exchange Commission (Asset Backed Security Issue) Rules, 2004
Securities and Exchange Commission (Public Issue) Rules, 2006
Securities and Exchange Commission (Rights Issue) Rules, 2006

Page 33
Public Issue of Securities:
If any issuer wants to raise capital through public offering of securities it has to company
with the securities and Exchange commission (Public Issue) Rules, 2006. These rules require
engagement of an issue manager registered with the Commission and gets the proposed issue
underwritten by an underwriter who is also registered with the Commission. Intending issuer
in association with the issue manager prepares prospectus and collects necessary documents
that required to be filed with the Commission along with the draft proposal.
The draft prospectus, among other things, must disclosed name of the company and business
in which it is engaged along with description of property and competition, types, number and
price of securities being offered, information about issue manager, underwriters directors and
key officials along with their compensation and information about related party transactions,
risk factors, financial conditions use of proceeds, lock in provision and subscription opening,
closing and refund provision in the event of either
Cancellation of offering or unsuccessful in getting shares supplied for. Price of the securities
offered is determined by the issuer in association with issue manager. However, issue price
must be substantiated to the Commission. Although, the Commission accords consent to
publish prospectus on full discloser basis, yet it ensures certain requirements in according
said consent so that investor’s interest could be protected.
During the FY 2006-2007, the Commission accorded consent to 10 companies to raise capital
of Tk.3863.30 million through initial public offering. The subscription for shares of the above
10 companies was Tk.3873.40 million against offer of Tk.3863.30 million. The application
money of 10 companies was 8.77 times more than the amount of public issue. It appears that
there is a lot of demand for securities in primary market. Information concerning public issue
during the year is furnished at Annesure-4.
The Comparative picture of participating general investors in the IPO during the last few
years is furnished below:
Size of IPO Subscribed Amount

FY No. of Companies %
(in million Tk.) (in million Tk.)
2002-03 13 1161.20 4048.90 3.39
2003-04 5 723.00 6147.80 8.50
2004-05 14 1159.10 12709.70 10.98
2005-06 8 990.50 13943.10 14.08

2006-07 10 3863.30 33873.40 8.77

Page 34
Size of IPO
Subscribed Amount (in million Tk.)
35000 33873.4
30000
25000
20000
15000 13943.1
12709.7
10000
6147.8
5000 4048.9 3863.3
1161.2 723 1159.1 990.5
0
0
2002-03 2003-04 2004-05 2005-06 2006-07
Securities issue through Private Placement:
Rules that are required to be complied with for issuance of securities through private
placement is Securities and Exchange Commission (Issue of Capital) Rules, 2001 under
which applicants has to furnish certain information and documents to the commission. While
according consent the commission imposes conditions that include timely preparation of
financial statements and furnishing of the same to the Commission, execution of all
transaction except petty cash items through company’s bank account. These conditions help
issuer companies elevate their corporate governance status and make them ready for raising
capital through public offering.
Capital Rising:
During the financial year 2006-2007, the Commission accorded consent to 45 public and 38
private Ltd. Companies to raise capital through issuance of privately placed bonus share,
ordinary shares, preference shares, GDR of Tk.31196.80 million and debt securities of
Tk.2081.25 million under the Securities and Exchange Commission (Issue of Capital) Rules,
2001. Break-up of the said capital raising are as follows:

Page 35
Private Limited Company:
Total capital (Million

Nature of raising capital Number of companies
Taka)
Ordinary shares 30 17872.20
Debenture 1 25.00
Rights share 2 11200.00
Bonus share 9 409.60
Preference share 1 600.00
Convertible preference share 1 90.00
GDR 1 1000.00
Total 45 31196.80
Public Limited Company:

Total capital (Million
Nature of raising capital Number of companies
Taka)
Ordinary shares 29 6787.90
Debenture 3 77.50
Rights share 1 11200.00
Bonus share 1 9.60
Preference share 4 2737.50
Total 38 20812.50
Rights Issue:
Share issue to existing shareholders by listed companies in proportion to their capital is
approved by the Commission under Securities and Exchange Commission (Rights Issue)
Rules, 2006. As per the said rules, such rights issue and price are required to be approved by
the shareholders in general meeting.
During the said period, the commission accorded consent to 6 companies for issue of right
shares of Tk.3352.60 million compared to Tk.1537.20million of 7 companies during 2005-06
and the Commission accorded consent 3 rights issues amounting to Tk.447.60 million of 3
companies in 2004-05.
11. FUTURE PLANNING
Securities and Exchange Commission has been trying persistently to develop the Bangladesh
capital market To increase the depth of Bangladesh capital market the Commission, En
association with stock exchanges, issuer companies and market intermediaries, is considering
to issue new instruments and encourage securities with good fundamentals to be listed with
the stock exchanges. The Commission Is also examining the book building system to

Page 36
introduce in our market. In Order to improve aforesaid scenario and for complying with
IOSCO Objectives and Principles of Securities Regulations, the Commission has taken
following measures:
 Establishment of a capital market Institute to educate investors and intermediaries

associated with the capital market and award degree on capital market
 To attract the securities with good fundamentals lathe capital market by introducing
book building system and for his purpose framing necessary rules.
 Assisting In establishing a regulatory body to ensure preparation of financial
statements based on facts by companies and audit of the same objectively by auditors.
 Continue efforts to bring the government owned companies to the market.
 Working with the stock exchanges to have an automated payment system of securities
transactions.
 Efforts to continue bringing profitable companies gradually in the capital market
 Measures to improve corporate governance scenario In Issuer companies and other
market intermediaries of capital market
 Framing and issuance of a comprehensive bond Issue rules.
 Measures to popularize government bond and corporate bond in capital market
 Devising regulatory framework for trading of derivative securities.
 Assisting to have unified listing regulations for cross-border listing of companies of
SARRC region.
 Issuance of new rules or amending existing ones In consultation with the stakeholders
 Continuing the functions of the Consultative Committee consisted of DSE, CSE and
SEC officers and consults the Commission’s activities with the SEC Advisory
Committee.
 Strengthen the surveillance system of SEC to enhance transparency in secondary
market.
 For effective and smooth discharging of duties reposed on the Commission. Capacity
of building existing staff members and recruiting new professional staff.

Page 37

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1.

ORIGIN OF THE REPORT

1.1 OBJECTIVE OF THE STUDY

 To present an overview of Security Exchange Commission.

1.2SCOPES AND METHODOLOGY OF THE REPORT

 Some websites had no direct reference.

Security Exchange Commission

Securities and Exchange Commission

Security Exchange Commission

Act No.15 of 1993

Security Exchange Commission

2. Establishment of the Commission.- (1) As soon as may be after the commencement

Security Exchange Commission

Security Exchange Commission

Security Exchange Commission

Security Exchange Commission

17. Delegation of powers.- The Commission may, subject to well-defined conditions,

18. Punishment. - Whoever contravenes or intends to contravene or aids and abets to

Security Exchange Commission

Public Issue of Securities:

General requirements for filing application

� Ten copies of draft prospectus

Security Exchange Commission

3. Format and contents of the prospectus

1. Financial statement of the company

B. Information to be contained in the Prospectus

Risk factors as per SEC (Public Issue) Rules, 2006

Other pertinent information

Security Exchange Commission

Fees for public offering and listing of security

Fees to be paid to the each stock exchange:

• Listing fee for preferred shares and fixed income securities:

Preconditions for making repeat public offering

Security Exchange Commission

� Information concerning the repeat public offering shall be disseminated as a price

Types of Securities & Rights of shareholders

� Smallest unit of capital.

Security Exchange Commission

� Cumulative preference shares

Rights of Ordinary Shareholders as specified in Companies Act, 1994

Security Exchange Commission

Security Exchange Commission

1. Bangladesh Capital Market:

Securities and Exchange Commission:

 Securities Act, 1920

The Dhaka Stock Exchange (DSE):

DSE is self-regulatory not-for-profit organization. As a self-regulatory organization DSE

Security Exchange Commission

Book Building Method:

Trading of Securities in the Exchanges:

Settlement of Securities transactions in the Exchanges:

Security Exchange Commission

NAME OF THE NUMBER OF NUMBER OF

“A” CATEGORY 141 140

Securities trading in Exchange through Borrowing:

Corporate Governance Guidelines:

The Commission has issued “Corporate Governance Guidelines” on February 2006, on

Security Exchange Commission

Foreign Portfolio Investment:

SEC Advisory Committee Meeting Held:

Seminar on “Credit Rating and Capital Market Development”:

Security Exchange Commission