Only research analysts can predict stock market: BSEC

None other than research analysts can publicly share their market or stock price forecasts, the Bangladesh Securities and Exchange Commission (BSEC) said in a statement on Thursday.

The regulator, observing a rise in the spread of capital market-related misinformation and rumours in cyberspace recently, issued the statement to remind the public of the regulatory prohibition.

Spreading undisclosed price-sensitive information, false information, or rumours online is a punishable offence, the BSEC warned.

Anyone sharing market or stock price predictions online without being a research analyst will be considered in violation of securities law.

The BSEC urged everyone to refrain from spreading baseless information online, warning that violations would result in strong legal actions.

However, research analysts complying with the Bangladesh Securities and Exchange Commission (Research Analysis) Rules 2013 are free to publicly share their research-driven predictions on the market and stock prices, clarified the BSEC.

According to the rules, a research analyst is a person either employed by a market intermediary or investment adviser or working for an independent research firm who analyses and evaluates investments in securities and prepares written reports, including investment recommendations through rating systems reflecting the analyst's research.

Broker-dealers, merchant banks, asset management companies, investment advisers, or independent research firms are the five types of institutions that can publish research reports. They must have at least a 3-member research team, including a head of research.

Investment advisers and independent research firms must have regulatory registration from the BSEC.

Research analysts must have educational or professional qualifications such as CFA, CPA, CA, CMA, CS, MBA, MBM, or a master's in economics or business studies, or capital market-related certificates from the Bangladesh Institute of Capital Market, along with three years of capital market experience.

Having a master's degree in other disciplines, foreign training, and five years of capital market experience will also make one eligible to be a research analyst.

Analysts' code of conduct includes proper disclosure of conflicts of interest. Any investment banking relationship with the company concerned in the past 12 months or potential in the next 12 months, any other fee-generating engagement with the company, and any investment in the company – everything must be disclosed.

Investment rationale, research methodology, investment risk, investment recommendation, target price, and absolute and relative valuation based on the forecasted financials of the company must be included in the research report forecasting share prices, according to the rules.

The Bangladeshi investment professionals' community is growing fast.

Analysts welcomed the clarification allowing their prediction sharing, as they used to refrain from public forecasting due to some previous confusing regulatory statements.

This created a vacuum in informed opinion-sharing on public domains, leading to the spread of uninformed predictions, which destabilised the market environment.

The BSEC has yet to issue any investment advisory licenses to qualified individuals, as seen in other markets, including India.