Muhammad Ayub Ali :
Around 25 per cent of interest earned from consolidated customer accounts held by stock market brokerage houses will be deposited into the Investor Protection Fund, while the remaining 75 per cent will be retained by the brokerage houses to enhance investor protection, according to a source at the Bangladesh Securities and Exchange Commission (BSEC).
This decision, recently approved by the task force formed by the DSE Brokers Association of Bangladesh (DBA) and the BSEC, aims to bolster investor protection and strengthen regulatory measures.
Previously, a directive required brokerage houses to distribute
interest proportionately among investors. However, compliance with this directive was lacking.
Md Saiful Islam, President of the DBA, stated to The New Nation: “We will adhere to the BSEC decision to ensure market stability and enhance investor protection.”
Investors had sought relief from the BSEC due to the economic slowdown caused by the Covid-19 pandemic and a slump in the stock market.
Following recommendations from the DBA and the task force, BSEC decided to allocate 75 per cent of the interest earnings from maintenance and related accounts to brokerage houses. This represents a reduction from the previous 100 per cent entitlement.
The Investor Protection Fund, established in August 2014, aims to safeguard investors’ interests. Brokerage houses maintain consolidated customer accounts, which hold unused funds from clients’ beneficial owner accounts.
These funds are intended exclusively for securities purchases or collecting commissions and fees. Any misuse of these funds results in account shortfalls.
A BSEC official noted that brokerage houses had failed to implement the Investor Protection Fund guidelines due to market downturns.
Additionally, stock exchanges did not provide detailed updates to the commission regarding compliance.
“The commission has taken this decision to prioritise investor interests and based on recommendations from the DBA and the task force. However, relevant rules will need to be amended before implementation,” the official added.
As per the Securities and Exchange Rules, 2020, interest earned from bank accounts opened for consolidated customer accounts shall not be treated as the income of stockbrokers or dealers.
Net interest income, after deducting bank charges, must be proportionately distributed among customers.
Any unallocated interest income must be transferred to the Investor Protection Fund within 30 days of the financial year’s end. Failure to comply will result in a 2 per cent monthly penalty on the delayed amount.
In June 2021, BSEC issued a further directive mandating proportionate interest distribution to customers based on their account balances.
For example, customers maintaining a deposit of at least Tk 1 lakh for one month in a financial year are eligible to receive interest.
By amending the relevant rules and enforcing these measures, the BSEC seeks to ensure stricter compliance, increased transparency, and greater protection for investors in the stock market.
