Complete overhaul of DSE, CSE regulatory affairs teams ordered

Amid ineffective monitoring by brokerage firms and market surveillance, the Bangladesh Securities and Exchange Commission (BSEC) has ordered both the country's bourses to carry out a massive overhaul in their regulatory affairs division (RAD) teams.

In a letter last week, the market regulator asked the bourses to transfer all their employees who have been working in any of the RAD departments except the Corporate Governance and Financial Reporting Compliance (CGFRC) Department for more than three years to other departments that are not under the RAD.

The bourses' Regulatory Affairs Divisions have six departments – Surveillance, Monitoring and Compliance, Investigation and Enforcement, Listing Affairs, Investor Complaints Arbitration and Litigation, and the CGFRC Department.

No transfer will take place to a RAD department from another RAD department and the heads of the eligible RAD departments must be transferred, ordered BSEC.

The order aims to "improve investors' confidence and market integrity", the commission said in its letter.

A BSEC senior official, seeking anonymity, told The Business Standard, the three brokerage firms – Tamha, Crest and Banco – managed to embezzle clients' money amid poor monitoring by the department concerned of Dhaka Stock Exchange (DSE).

It was the responsibility of the Monitoring and Compliance Department to prevent such incidents, he added.

Also, there has long been serious allegations against some RAD teams, especially the Surveillance Department, that some of their members leak classified information to dirty market groups to give them unfair edges in trading.

Declining to comment on those, BSEC Commissioner Professor Shaikh Shamsuddin Ahmed said, "Reshuffling is a good way to prevent any lethargy or misconduct within teams and to strengthen governance."

It is a continuous process and the regulator is rotating jobs of its officials regularly, and the bourses should introduce the same culture that brings dynamism, he said.

Following the BSEC letter, the DSE has already replaced four of its RAD officials and said it is the second phase of the ongoing job rotation within the premier bourse after the first phase transfers took place last December.

There will be similar groups of transfers in the coming months, DSE said in its recent transfer notice.

The DSE, however, is yet to replace the Monitoring and Compliance Department head, despite the massive failure of the department in the prevention of the brokerage frauds that occurred in recent years and that ignited a criticism within the bourse itself.

Two of the DSE employees, seeking anonymity, said DSE instead rewarded its Deputy General Manager and Head of Monitoring and Compliance Mohammad Shafiqul Islam Bhuiyan by making him the head of the entire RAD – the chief regulatory officer (in-charge).

One said Bhuiyan was transferred to the Monitoring and Compliance Department from the post of head of Listing Affairs Department a few years back following a blunder regarding Rahima Food Corporation that came to the fore.

Meanwhile, the Chittagong Stock Exchange (CSE) has complied with the BSEC order by replacing one-fourth of its eligible RAD officials last week and sought BSEC permission for gradual compliance as it has not enough managers in non-RAD departments to replace with.

The bourses also need time to complete the replacement for the sake of retaining institutional memory, said CSE Managing Director (In-charge) Md Ghulam Faruque.

The DSE has around 40 managerial employees in its RAD departments and around 25 were serving for more than three years. 

In the CSE, over 20 of its 26 RAD officials were serving for more than three years.