BSEC to suspend IPO quota for inactive intermediaries

The stock market regulator will suspend initial public offering (IPO) quota facilities for merchant banks and asset management companies that did not comply with their licensing conditions for being active in the business.

The Bangladesh Securities and Exchange Commission (BSEC) has identified 15 merchant banks, out of a total of 65, which did not submit any proposal to list a company on the stock market.

As per the rules, each merchant bank must submit at least one IPO issue proposal to the regulator every two calendar years.

According to the BSEC's decision, the inactive investment banks will not get any quota facilities in the primary market.

Merchant banks and asset management companies are enjoying quota facilities in IPOs and qualified investor offers (QIOs) as per the rules.

The merchant banks include BetaOne Investments, Cosmopolitan Finance, EC Securities, Exim Islami Investment, FAS Capital Management, and First Security Islami Capital and Investment.

Grameen Capital Management, GSP Investment, Hal Capital, IL Capital, Jamuna Bank Capital Management, Meghna Capital Management, PLFS Investments, Sonali Investment, and Strategic Finance Limited, are other companies to face suspension.

The regulator has also identified eight asset management companies, out of a total of 51, which are not currently managing any funds. They also will not get any quota facilities in the primary market.

The companies are Alif Asset Management Company, Invest Asia Capital Asset Management, BDV Asset Management Company, Meghna Asset Management, Bloominance Asset Management Company, Blue-Wealth Assets, Belt and Road Asset Management, and BMSL Asset Management Company Limited.  

"We have decided to suspend the IPO quota facility for those asset management companies and merchant banks," said BSEC Chairman Professor Shibli Rubayat-Ul-Islam.

"We may also cancel licences of those companies after further investigation."

Earlier, the commission looked into the business activities of asset management companies that do not manage any funds or are not in operation after getting licences.

On the other hand, the BSEC sought information from merchant banks and portfolio managers on their performance as the regulator believes many of the institutions are not fulfilling their licensing conditions. 

Market insiders said the mutual fund industry cannot create confidence among investors for failing to make a good return in the last decade.

Consequently, liquidity crisis, lack of sufficient skilled workforce and leaders, lack of proper disclosure, and goodwill are also responsible for this situation, added the insiders.

As a result, some asset management companies failed to get funds and faced challenges.

Regarding merchant banks, industry insiders said a dozen of investment banks are active in all activities – issue and portfolio management as well as underwriting – while the majority of them manage portfolios only.

Some merchant banks are not able to file a new IPO to the commission within the stipulated time due to lack of qualified manpower, insiders added.

Insiders further said a few merchant banks did not play an active role as market participants. As a result, issuer companies enter into agreements with well-known managers regarding IPO listing.