The High Court on Tuesday asked the Anticorruption Commission (ACC) and the Bangladesh Financial Intelligence Unit (BFIU) to investigate the allegations of huge stock investments through "shell companies" by Dr Mosharraf Hossain, chairman of the Insurance Development and Regulatory Authority (Idra).
Upon a writ petition by a retail stock investor, the division bench of Justice M Enayetur Rahim and Md Mostafizur Rahman directed the ACC and the BFIU to submit their reports to the court in 30 days.
The court also issued a rule asking the authorities concerned to explain why the stock transactions through four funds of two alleged shell companies,
the allegations of corruption and money laundering against Dr Mosharraf and his wife would not be investigated and cases filed against them accordingly.
The Financial Institutions Division secretary, ACC chairman, National Board of Revenue chairman, Bangladesh Bank Executive Director leading BFIU,
director-general of Labour Directorate have been asked to respond to the rule.
The allegations Abu Saleh Mohammad Amin Mehedi in his writ petition submitted documents supporting his allegations that Dr Mosharraf has invested over
Tk4.2 crore in the capital market through two provident funds and two gratuity funds of his family-owned firms – Loves and Lives Organics Ltd and
Gulshan Valley Agro Industries Ltd.
The writ petitioner alleges that Dr Mosharraf uses the two firms as shell companies for his stock investment citing the disproportion between the investment size and the profile of the firms which Dr Mosharraf proclaims as yet to begin operations.
He registered the four funds as eligible institutional investors (EII) and enjoyed prioritised allocation of primary shares in many initial public offerings over the recent years since the companies and their employees' provident and gratuity funds were created in 2017 and 18.
In the secondary stock market, the four funds have investments.
Like Mosharraf's directorship in the two private companies, the chairmanship in the trustee boards of the four funds is prohibited for an Idra chairman, argued the petitioner's lawyers citing the Idra Act, 2010.
In late September, after a hearing on a separate writ petition by the same stock market investor, the High Court issued a rule against the Financial
Institutions Division Secretary of the Ministry of Finance asking him to reply why the appointment of Mosharraf would not be declared illegal.
The petitioner claimed the funds were "fictitious" as Mosharraf himself operates the investment accounts of the EIIs.
Barrister Mustafizur Rahman, a lawyer for the petitioner, told The Business Standard, "How many employees do the two companies, which are yet to begin operations, have? And how much did the employees contribute to the funds in just 3-4 years?"
The Trust Act allows such funds to invest at best 25% of their total assets and if the four funds have complied with the act, they must have had over Tk12 crore in total assets, he argued.
And, to build Tk12 crore of total assets in the two companies' gratuity and contributory provident funds, it must have over Tk100 crore in salary payments to employees and such a salary payment demands Tk600 crore to Tk1,200 crore in annual sales.
"Is any of Mosharraf's self-proclaimed non-operating firms so big?" asked the lawyer.
"Bank account statements of the funds too revealed crores of taka in transactions," he added. "Our client pleaded for an investigation into the source of such huge amounts."
When contacted, Dr Mosharraf Hossain told TBS, "To my knowledge, the government service does not bar capital market investments as it does not take too much time for buying and selling in the modern stock market."
"I have been a capital market professional and tried the best ways for my family companies to invest in the country's prosperous capital market," he said over the telephone.
Regarding the huge investment and the companies' small profile, he said, "In an investment account, one can use borrowed money as equity, and on top of that, brokers offer a margin loan too, and the size of the investment can grow over time."
"A group is desperately working against me due to my regulatory duties," he complained.
Meanwhile, the ACC is also investigating Dr Mosharraf's alleged acts for graft from a leading life insurer Delta Life Insurance Company Ltd nearly a year ago.