DSE heats up over 'authoritarian' appointment of independent directors

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The Dhaka Stock Exchange (DSE) is experiencing strong reactions from its shareholder stockbrokers against the securities regulator's unilateral selection of the bourse's new independent directors.

Some have remarked that they have never witnessed such authoritarian behaviour from the capital market regulator toward the premier bourse.

The reconstituted Bangladesh Securities and Exchange Commission (BSEC) on 20 August verbally ordered the resignation of all seven DSE independent directors appointed during the toppled regime, which they complied.

This mass resignation created a procedural vacuum in the nomination process for new directors, as the Nomination and Remuneration Committee (NRC) of the bourse's board was left without a quorum and therefore unable to recommend new candidates for BSEC approval, as required by the rules.

Four shareholder directors, elected by the 244 shareholders, approached the new BSEC chairman to raise concerns about the procedural crisis in appointing new independent directors.

They were instructed to submit a list of potential candidates, and on 1 September, the DSE recommended a set of nine individuals with diverse backgrounds.

The DSE's recommended list included technology entrepreneur Fahim Mashroor, Sylvana Quader Sinha, Brigadier General Md Mafizul Islam Rashed, former National Board of Revenue member Shams Uddin Ahmed, Chartered Accountant Mohammed Forkan Uddin, Dhaka University professor of public administration Mobasser Monem, Metropolitan Chamber of Commerce and Industry President Kamran T Rahman, and Chartered Accountant Jahidur Rahman.

However, during a commission meeting on the same day, the BSEC only approved Brigadier General Md Mafizul Islam Rashed from the DSE's list and instead filled the other six positions with banker and former DSE MD KAM Majedur Rahman, Professor Major General (retd) Mohammad Quamruzzaman, Financial Institutions Division Additional Secretary Nahid Hossain, DU professor of economics Mohammed Helal Uddin, former general manager of Metlife Bangladesh Syed Hammadul Karim, and Bangladesh Data Center and Disaster Recovery Site Limited CEO Mohammed Ishaque Miah.

It has been customary for the head of the 46 Independent Infantry Brigade to serve on the DSE board for the past two decades, making it particularly unfortunate that the BSEC ignored the entire list it had requested from the DSE.

In a statement on Sunday evening, the BSEC explained that the commission typically approves the list recommended by the DSE NRC, which no longer exists following the resignation of all the independent directors.

As a result, the DSE was unable to recommend names, leading the regulator to appoint the independent directors to resolve the vacuum-led crisis for the sake of the overall development of the capital market and in the interests of investors.

DSE shareholder director Shakil Rizvi told TBS on Monday afternoon, "We have been hearing the frustration of DSE shareholders tomorrow as they had no say in the appointment of independent directors at their stock exchange company."

While no one questioned the qualifications of the BSEC-appointed independent directors, the issue lies in the fact that the owners of the exchange company felt completely ignored, he added.

"It is unfortunate that the post-revolution regulator behaved in an even more authoritarian manner by completely ignoring the owners of the bourse," DSE Brokers Association (DBA) President Saiful Islam told TBS.

"We understand that the situation is unusual, but there would have been no problem if decisions were made based on an amicable consensus, which the BSEC did not consider," he added.

For the first time, the DSE has a board without any professional accountants, and the absence of a female director is also a concern raised by DSE shareholders, he also said.

DSE members will soon meet formally to discuss the matter, according to sources.

The DBA, in a letter to the finance adviser on Sunday, urged for reforms in the Stock Exchange Demutualization Scheme enacted a decade ago, as DSE shareholders believe they should have at least an equal voice on the bourse's board.

The demutualised DSE has 13 board seats – four for shareholder directors, one for the strategic investor, one for the managing director, and the remaining seven for independent directors, who are recommended by the DSE NRC and finally approved by the BSEC.

Controlling the bourse through the majority of independent directors has been a method used by the BSEC under the past two chairmen to get anything done, whether it be approving the listing of junk companies or driving the bourse according to the regulator's wishes.

The two past chairmen were heavily criticised for their wrongdoings in the market, and the market still suffers the consequences.

Independent directors, in an effort to retain their seats, rarely stood against the top BSEC officials.

BSEC Director and Spokesperson Farhana Faruqui told TBS that the regulator selected independent directors based on their profile and expertise that should best serve the interests of the bourse, the capital market, and the investors.