SEC provision to ‘protect interest of investors’

The attorney general has backed the directive of the securities regulator on holding minimum two per cent shares by sponsor-directors of listed companies saying that the move was taken for the sake of investors' interest and companies' transparency.

Attorney general---Mahbubey Alam--- upheld his support for the directive of the securities regulator for holding required amount of shares on Monday when the members of the Securities and Exchange Commission (SEC) and the leaders of Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) called on him at his office in the city.

The representatives of SEC and the bourses met the attorney general after a bench of the HC Division, comprising Justice Farid Ahmed and Justice Sheikh Hassan Arif, issued the rule Sunday following a writ petition filed against the decision of the SEC in holding minimum two per cent shares.

"The SEC made the provision for holding minimum two per cent shares by the sponsor-directors to protect the interest of investors and ensure transparency in the functions of listed companies as well," Mr. Alam told the FE.

Mr Alam said during the upcoming hearing on rule he would put forward his supportive speech before the court so that the SEC directive remains unchanged.

"I will support the securities regulator as the directive was issued for public interest," he said.

He also said the SEC's directive is a qualifying issue for the sponsor-directors to hold their directorship.

"Like others, as a lawyer I have to fulfill specific criteria. So, it's a valid question that the sponsor-directors also should own minimum moral stakes in their respective companies to keep their directorship," Alam added.

He said as a whole the SEC is positive for the investors, market and the listed companies.

"The HC did not issue any stay on the execution of the SEC's directive. The court only issued a rule," attorney general told the reporters after the delegation met him.

"Investors should realise the matter. We hope we will be successful under the leadership of attorney general," DSE Rakibur Rahman said.

The delegation, which Monday met the attorney general, included the SEC Member Abdus Salam, DSE President Rakibur Rahman, senior vice president Ahmad Rashid, vice president Md. Shahjahan, two DSE directors--- Minhaz Mannan Emon and Mizanur Rahman Khan, chief executive officer Dr. Musharraf M Hussain, chief financial officer Shuvra Kanti Choudhury and the CSE chief executive officer Syed Sajid Husain.

Meanwhile, the sponsor-directors of listed companies who own less than two per cent shares will be able to make declaration in purchasing the required portion of shares up to May 21 this year, officials said.

On November 22, 2011, the Securities and Exchange Commission (SEC) imposed a mandatory provision for the sponsor-directors, other than the independent ones, for holding individually at least two per cent of their companies' paid-up capital.

As per the SEC's directive, the sponsor-directors, willing to hold their directorship, will have to fulfill the quota of required amount of shares within six months of the issuance of the directive and deadline of purchasing shares by them is May 21, 2012.

As per the securities rules, the sponsor-directors are to purchase shares within 30 days of making declaration through the stock exchange.

Meanwhile, confusion has arisen in the market whether the sponsor-directors will have to make declaration of purchasing shares by keeping 30 days in hand or not.

Many investors also have raised similar question regarding the deadline of making declaration for purchasing by the sponsor-directors.

The officials of Dhaka Stock Exchange (DSE) related to the function of purchasing or selling shares by sponsor-directors said, it's not mandatory to make declaration before 30 days to purchase or sell the shares.

"As per the rules, they will have to complete the purchasing of shares within 30 days of making declaration. They are to submit a report to the stock exchange saying that they have completed the purchasing of shares within the specific timeframe," a DSE official told the FE.

He said the sponsor-directors get maximum 30 days for purchasing shares after making declaration. "That's why they have no bar to submit the report just after one or two days of purchasing shares."

The officials said any sponsor-director willing to purchase shares to comply with the SEC's directive will be allowed to purchase shares even at the eleventh hour of the closing day's trading session according to declaration.

"The sponsor-directors will be able to purchase share on May 21, 2012 by making declaration on the same day. The stock exchange is bound to count the shares purchased by them at the eleventh hour of the day (May 21), subject to declaration," the official added.

He said the trading entitlement will say whether any sponsor-director purchased shares within specific timeframe or not.