Bangladesh Securities and Exchange Commission Act, 1993 #
- Establishment and Purpose of the Commission The Act establishes the Bangladesh Securities and Exchange Commission (BSEC) as a statutory body with perpetual succession and a common seal. This means that the Commission has a continuous existence and can enter into contracts, acquire, hold, and dispose of property, and can sue or be sued in its name. The primary purpose of the BSEC is to protect the interests of investors in the securities market, ensure the proper issuance of securities, and foster the development and regulation of the capital and securities market in Bangladesh. This is crucial for maintaining investor confidence and ensuring the smooth functioning of the financial markets.
- Composition and Appointment The Commission is composed of a Chairman and four Commissioners, all of whom are appointed by the Government. The Chairman serves as the chief executive of the Commission. Appointees to these positions must have expertise in relevant fields such as law, economics, accounting, or other disciplines deemed necessary by the Government. This ensures that the leadership of the Commission is well-equipped to handle the complexities of the securities market. The Chairman and Commissioners serve for a term of four years and may be reappointed for one additional term, provided they do not exceed the age of 65 years. This provision ensures continuity and stability within the Commission while also allowing for periodic infusion of new perspectives.
- Functions and Powers The BSEC is endowed with extensive regulatory powers to oversee the securities market. It regulates stock exchanges, brokers, sub-brokers, share transfer agents, and other intermediaries involved in the securities market. The Commission is also tasked with prohibiting fraudulent and unfair transactions, including insider trading, and regulating the holding of shares, takeovers, and acquisitions of companies. Additionally, the BSEC has the authority to requisition information, conduct inspections, investigations, and audits of market participants. It also plays a significant role in promoting investment education and training for market intermediaries, thereby enhancing the overall efficiency and transparency of the securities market.
- Meetings and Decision-Making The Commission’s meetings are held at times and places as prescribed by rules or determined by the Chairman. A quorum for these meetings is formed by the presence of three Commissioners. Decisions are made by a majority vote of the Commissioners present, and in the event of a tie, the presiding officer has a casting vote. This decision-making process ensures that the Commission’s actions are democratic and representative of the majority view. Furthermore, the validity of the Commission’s actions is not affected by any vacancies or defects in its constitution, ensuring that its operations remain uninterrupted.
- Financial Provisions The BSEC has its own fund, known as the Bangladesh Securities and Exchange Commission Fund, which comprises grants from the Government, local authorities, and other institutions. This fund is used to cover the salaries and allowances of the Commission’s officers and employees, as well as other necessary expenditures. The Commission is required to submit an annual budget to the Government and its accounts are audited by the Comptroller and Auditor General of Bangladesh. This financial oversight ensures that the Commission’s resources are used efficiently and transparently.
- Legal Provisions Upon its establishment, the BSEC assumes the liabilities and responsibilities of the Government under previous securities laws. Violations of the Act can result in rigorous imprisonment, fines, or both. The Commission has the authority to impose fines for non-compliance with its orders or directions. Aggrieved persons have the right to appeal against orders made by the Commission, provided they do so within a prescribed period and in the prescribed form. This legal framework ensures that the Commission’s regulatory actions are enforceable and that there are mechanisms for redressal of grievances.
- Miscellaneous Provisions The Act includes several miscellaneous provisions to ensure the smooth functioning of the Commission. Actions taken in good faith under the Act are protected from legal proceedings, providing a safeguard for the Commission’s officers and employees. The Commission also has the power to exempt any person or organization from certain provisions of the Act if it deems necessary in the public interest. Additionally, the Commission can make rules for carrying out the purposes of the Act, subject to public consultation and Government approval. These provisions ensure that the Commission operates within a clear legal framework while retaining the flexibility to adapt to changing market conditions.
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Bangladesh Securities and Exchange Commission 1993
Securities and Exchange Ordinance, 1969: #
The Securities and Exchange Ordinance, 1969 is the legal framework designed to regulate the securities market in Bangladesh. It aims to protect investors, ensure fair practices, and maintain the integrity of the capital markets. The Ordinance extends to the entire country and came into force as per the notification by the Commission. Its primary purpose is to safeguard investors’ interests, regulate the issuance and trading of securities, and oversee the functioning of stock exchanges.
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Control Over Issue of Capital The Ordinance mandates that any issuance of capital, whether within or outside Bangladesh, requires the consent of the Securities and Exchange Commission. This provision ensures that all capital market activities are monitored and regulated to prevent fraudulent practices and protect investors. The Commission also has the authority to review and approve prospectuses before they are issued to the public, ensuring that all necessary information is disclosed and that the interests of investors are safeguarded. Additionally, the Commission can impose conditions on the issuance of capital and grant exemptions or condone contraventions under specific circumstances.
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Registration and Regulation of Stock Exchanges Stock Exchanges must be registered under the Ordinance to operate legally. The registration process involves meeting specific conditions designed to ensure fair dealings and protect investors. These conditions include maintaining proper accounts, submitting annual reports, and adhering to regulations set by the Commission. The Commission also has the power to suspend or cancel the registration of a Stock Exchange if it fails to comply with the Ordinance’s provisions. This regulatory framework ensures that Stock Exchanges operate transparently and maintain high standards of integrity.
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Regulation of Issuers Issuers of securities must apply to Stock Exchanges for listing their securities. The Commission can direct the listing or delisting of securities to protect public interest and ensure market integrity. Issuers are required to submit annual reports and other documents to the Stock Exchange and the Commission, providing transparency and accountability. The Commission can also mandate the compulsory listing of securities if it deems it necessary for public interest. These measures ensure that issuers operate transparently and that investors have access to accurate and timely information.
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Prohibitions and Restrictions The Ordinance imposes several prohibitions and restrictions to prevent market manipulation and protect investors. These include:
- Short-Selling: Prohibited for directors, officers, and significant shareholders to prevent market manipulation.
- Trading Restrictions: Directors, officers, and principal shareholders are restricted from trading within six months of purchase to prevent insider trading.
- Fraud and Manipulation: Prohibits fraudulent acts, false statements, and insider trading to maintain market integrity.
- Credit and Hypothecation: Restricts the extension of credit and hypothecation of customers’ securities to prevent conflicts of interest and protect investors’ assets.
- Enquiries, Penalties, Orders, and Appeals The Commission has the authority to conduct enquiries into the affairs of Stock Exchanges and issuers to ensure compliance with the Ordinance. Penalties for non-compliance include fines and imprisonment, providing a strong deterrent against violations. The establishment of Special Tribunals ensures that offences under the Ordinance are tried efficiently and fairly. The Commission can also issue prohibitory orders to prevent contraventions and protect investors. These provisions ensure that the regulatory framework is robust and that violations are dealt with promptly and effectively.
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Securities and Exchange Ordinance 1969
Depositories Act, 1999 #
The Depositories Act, 1999, was enacted to regulate depositories in securities and ensure the smooth functioning of the securities market in Bangladesh. This Act facilitates the holding of securities in electronic form and the transfer of ownership through electronic book entries, thereby enhancing the efficiency and transparency of the securities market. Under this Act, depositories are established as entities that hold securities in electronic form. These depositories must be registered under the Companies Act and obtain a certificate of commencement of business from the Securities and Exchange Commission (SEC). One of the primary functions of depositories is to dematerialize securities, converting them from physical certificates to electronic form. This process significantly reduces the risks associated with physical certificates, such as loss, theft, and forgery.
The Act outlines the rights and obligations of various stakeholders, including depositories, participants (such as brokers and agents), issuers (companies issuing securities), and beneficial owners (investors). It ensures that beneficial owners retain all rights and benefits of the securities, even though the depository is the registered owner. The transfer of securities is facilitated through electronic book entries, making the process faster and more efficient by eliminating the need for physical transfer deeds and reducing the time and cost involved in transferring securities. The SEC has the authority to regulate and oversee the operations of depositories, conducting inspections, audits, and investigations to ensure compliance with the Act and protect investors’ interests.
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