Course title- Financial Management Course code- BBA-2313 Section-B

Assignment On Securities and Exchange Commission (SEC)

Submitted to Ms. Afia Akter Senior Lecturer Northern University Bangladesh Prepared by
Towhidul Alam BBA 110103944 Showkat Ali BBA 080302856 Supra Sharmin BBA 070360611 Zakir Hossain BBA 090303351

Date of submission- 17th December, 2011

About Securities and Exchange Commission

The Securities and Exchange Commission (SEC) is the regulator of the capital market of Bangladesh, comprising Dhaka Stock Exchange and Chittagong Stock Exchange. The Securities and Exchange Commission (SEC) was established on 8th June, 1993 under the Securities and Exchange Commission Act, 1993. The Chairman and Members of the Commission are appointed by the government and have overall responsibility to administer securities legislation. The Commission is a statutory body and attached to the Ministry of Finance.

Mission of SEC The mission of the Securities and Exchange Commission is to Protect the interests of securities investors. Develop and maintain fair, transparent and efficient securities markets. Ensure proper issuance of securities and compliance with securities laws. And facilitate capital formation.
Function of Securities and Exchange Commission 1. Regulating the business of the Stock Exchanges or any other securities market. 2. Registering and regulating the business of stock-brokers, sub-brokers, share transfer agents, merchant bankers and managers of issues, trustee of trust deeds, registrar of an issue, underwriters, portfolio managers, investment advisers and other intermediaries in the securities market 3. Registering, monitoring and regulating of collective investment scheme including all forms of mutual funds. 4. Monitoring and regulating all authorized self regulatory organizations in the securities market. 5. Prohibiting fraudulent and unfair trade practices relating to securities trading in any securities market. 6. Promoting investors education and providing training for intermediaries of the securities market. 7. Prohibiting insider trading in securities.

8. Regulating the substantial acquisition of shares and take-over of companies. 9. Undertaking investigation and inspection, inquiries and audit of any issuer or dealer of securities, the Stock Exchanges and intermediaries and any self regulatory organization in the securities market. 10. Conducting research and publishing information.
11. Issue new rules and amend existing rules

Management of Securities and Exchange Commission

SECURITIES AND EXCHANGE COMMISSION 14th 15th, 16th & 20th Floor Jiban Bima Tower 10 Dilkusha C/A Dhaka-1000 Sl No. Name Designation Commission Chairman Member-I Member-I I Member-I I I Member-I V

01. Professor Dr. M. Khairul Hossain 02. 03 04 05 Professor Md. Helal Uddin Nizami Mr. Md. Amzad Hossain Mr. Md. Arif Khan Mr. A. Salam Sikder

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

Mr. Abdul Hannan Zoarder Mr. Anwarul Kabir Bhuiyan Mr. Farhad Ahmed Mrs. Ruksana Chowdhury Mr. A.T.M. Tariquzzaman Mr. Anowarul Islam Mr. Saifur Rahman Mr. Ashraful Islam Mr. M. Hasan Mahmud Mr. Mahbubul Alam Mr. Mahbuber Rahman Chow. Mr. Kamrul Anam Khan Mr. Mohammad Rezaul Karim

Officers of the Commission ED (Presently under lien for 2 years) ED ED (AdminFinance/Enf.) ED (CMRRC/Law) ED (CFD/R&D) ED (SRMIC,CDS) ED (SRI) Executive Director (Surveillance/MIS) Executive Director (CI,MF & SPV) Director (Reg.) Director (Law) Director (CI) Director (CMRRC.)

14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28 29 30 31. 32. 33. 34. 35. 36 37 38 39 40 41 42 43 44 45

Mr. Shafiul Azam Mr. Ripan Kumar Debnath Mr. Mir Mosharraf Hossain Mr. Mohammad Jahangir Alam Mr. Mahmoodul Hoque Mr. Prodip Kumar Basak Mr. Rajib Ahmed Mr. Abul Kalam Mr. Mansur Rahman Mr. Mohammad Abul Hasan Mr.Sheikh Mahbub Ur Rahman Mrs. Farhana Faruqui Mr. Abu Rayhan Mohammad Mutasim Billah Mr. Md. Fakhrul Islam Mazumder Mr. A.S.M. Mahmudul Hasan Mr. Muhammad Ziaur Rahman Ms. Mustari Jahan Mr. M.A Maleque Mrs. Anu Dey Mr. Md. Iqbal Hossain Mr. Rakibur Rahman Md. Saiful Islam Mr. Md. Ohidul Islam Mr. Mohammad Zahirul Haque Mr. Md. Yusuf Bhuiyan Syed Golam Mowla Mrs Sultana Parvin Mr. Hafiz Md. Harunur Rasid Ms Mahmuda Shireen, Assistant Director Mr. Md. Hossain Khan Mrs. Parvin Akter Mr. Md. Rashidul Alam

Director ( Survelliacne) Director (CMRRC) Director (Enforcement) Director (SRI) Director (MF.) Director (Corporate Finance) Director (MIS/Surv) Director (CI/Finance) Director (CI) Director (Admin/Enforcement) Director (Reg.) DD (Chairmans Office/IRD) DD (SRMIC) DD (Corporate Finance) DD(Law) DD(Law) DD (Enforcement) Accounts Officer AD (MF&SPV) AD (CI) AD (Surveillance) AD (Reg.) AD (SRI) AD (R&D) AD (Reg.) AD (CI/CDS) AD (MF&SPV) AD (Admin &Finance) AD (Survelliance) AD (Enf.) AD (Surveillance) PS to Chairman

Way to control financial Market or capital market Problems of Stock Markets in Bangladesh:
The unexpected rise and fall in share prices mostly followed from the general confidence of the investors about political stability, extreme happiness of investment in shares, prospect of quick capital gains, a vacuum in respect of institutional presence in the share market, monopolistic dominance of member brokers, inefficiency of the SEC to cape with the developments, absence of proper application of circuit breaker etc. Delivery versus payment mechanism was used as one of the main vehicles of manipulation. Kerbmarket gave birth fake and

forged share certificates. Although there are increasing trends in all the indicators, DSE, CSE are not free from problems, the problems of DSE, CSE may be summarized as under:

Price manipulation It has been observed that the share values of some profitable companies has been increased fictitiously some items that hampers the smooth operation of Stock market. Delays in Settlement: Financing procedures and delivery of securities sometimes take an unusual long time for which the money is blocked from nothing. Irregulation in Dividends: Some companies do not hold Annual General Meeting(AGM) and eventually declare dividends that confused the shareholders about the financial positions of the company Selection of Membership: Some members being the directors of listed companies of DSE, CSE look for their own interest using their internal information of share market. Improper financial statement: Many companies do not focus real position of the company as some audit firms involve incorruption while preparing financial statements. As a result the shareholders as well as investors do not have any idea about position of that company. OTHER
The concept of centralization of the securities market has not been

implemented that arise technical problems and political infighting.

The intrinsic values for securities traded are sometimes estimated without

considering the current market prices of the securities. The absence of comprehensive legal and supervisory framework.
Lack of skilled manpower as well as financial and non-financial institutions

involved in the securities market. The lack of proper policy framework that provides incentives and protection to investors.

 The dominance of bigger public sector and borrowing of public sector as

well as government form the institutional sources rather than the market. Suggestions to improve the activities of Stock Market
To introduce automated monitoring system that may control price

manipulation, malpractices and inside trading. To introduce full computerized system for settlement of transactions. To force the listed companies to publish their annual reports with actual and proper information that can ensure the interests of investors.
To control and abolish kerbmarket form premises of stock market.

To take remedial action against the issues of fake certificates.

The

composite Quotation system (CQS) should be introduced and implemented that available the exchange specialist bid-ask quotes to the subscribers.

To make arrangement to set-up merchant banks, investment banks and floatation of more mutual funds particularly in the private sectors.
Banks, insurance companies and other financial institution should be

encouraged deal in share business directly. The brokers should not be allowed to deal in the Scripps on their own accounts.
The management of DSE and CSE should be vested with professionals and

should not in any way be linked with the ownership of stock exchange and other firms. Major future prospects that will change the Stock Market: Within 3 to 6 months 8 large profitable government enterprises are going to be listed under Direct Listing Method adding value worth another 1 billion Dollar. The Telecom Giants in Bangladesh are finalizing their offers for IPO in the market.

 Power and energy sectors demand for capital is 5 to 10 billion dollar within

short time to meet the immediate needs of 5000 MW power demand.

A deep sea port requiring 1 billion dollar is going to start with a policy

decision that it will also be listed. The Pharmaceutical sector and API enjoying WTO benefit is growing sharply. Textile sector as backward linkage to thriving export oriented garments industries is booming.
Export oriented food processing industry needs huge capital and technical

capacity to meet the growing standards in global market for marine food, fruits and poultry. IT sector with our talented developers, yet to demonstrate the massive potentials of software industry of the country.

Future Programs for Further Development

1. Active market of government, municipal and corporate bonds

2.
3.

4. 5.
6.

beside the corporate bonds to create alternative investment. All securities to be brought under CDS within 2 years. All major infrastructure companies, specially those in power, telecommunication and energy sector are to be listed ensure to broaden the market depth with at least US$ 15 billion market cap by 2012 having daily average turnover from current level of average of 10 to 15 million dollar to a level of 70 to 100 million dollar 2 years. To strengthen merchant banks capacity to be more active. Ensuring speedy disposal of decisions for market operation. Ensuring greater degree of transparency in financial disclosure and management structure for better corporate governance. Departments and Principal Officers of SEC

Administration & Finance: Administration and Finance department deals with human resources, all sorts of logistic activities, to carry out day to day executive functions as well as finance & accounts. As part of Administrative functions, administration officials performed activities regarding

correspondence with concerned ministries, recruitment & training of human resources, procurement, motor pool etc. Capital Issue (Initial Public Offering has been renamed): Capital Issue Department of the Commission accords consent to issue equity and debt securities through initial public offer and also other than public offer. Public and private limited companies are required to take consent of the Commission for raising capital whose capital exceeds Tk. 10 million and 100 million respectively. This department also approves the issuance of listed companies rights share and repeat public offer. The department is headed by Mr. Md. Hasan Mahmud, Executive Director. Capital Market Regulatory Reforms & Compliance CMRRC department drafts amendments of securities laws, suggests reforms of the market and provides clarifications. The department is headed by Ms. Ruksana Chowdhury, Executive Director. Central Depository System (CDS) : Central Depository System (CDS) department supervises activities of Central Depository Bangladesh Limited (CDBL), activities of depository participants, dematerialization of listed companies' shares under depository system, issue and transfer of securities in dematerialized form, beneficiary owners (BO) accounts, and issue order/notification etc. related to depository system, under the Depository Act, 1999, the Depository Regulation, 2000 and Depository(User) Regulation 2003. The department is headed by Mr. Md. Anowarul Islam, Executive Director. Chairmans Office: -Function of the department is to conduct Commission Meeting and Coordination Meeting. Corporate Finance: The Corporate Finance Department (CFD) supervises and monitors the listed companies after issuance of primary shares in light of the securities laws. Activities of the department are oversight and reporting on issuers of listed securities related to on time submission of audited financial statements, half yearly financial statements and annual reports/minutes, examination of the aforesaid financial statements and reports/minutes, appointment of statutory auditors in compliance with securities laws, utilization of fund(IPO & Rights), compliance of conditions of notification regarding corporate governance, compliance of other securities laws, supervision and follow-up of the special audits conducted by the Commission, and review of existing securities laws, rules and regulations concerning CFD and proposed amendments thereto. The department is headed by Mr. A.T.M. Tariquzzaman, Executive Director Enforcement: Under the Securities laws, the Enforcement Department takes legal measures including imposition of penalty against those who breach/violate securities laws in consideration of

nature of crimes they commit. Prior to taking measures, it follows due process that includes giving the accused an opportunity of being heard. All departments of the Commission send referral to Enforcement Department if they see any violation of securities laws. The department is headed by Mr. Farhad Ahmed, Executive Director. Officers of the department are: Law: Functions of Legal department are assisting the lawyers engaged by the Commission to conduct the cases filed by or against the Commission in different courts, preparing written objection and statement on cases filed against the Commission, preparing para wise comments on writ petition filed against the Commission, signing case related documents with affidavit before the concerned officer of the court, preparing plaint/requisition for certificate cases, filing certificate cases and conducting those to realize the penalty imposed by the Commission, vetting the letters, orders, directives sent from different departments of the Commission and providing legal opinion on different matters sent from different departments of the Commission. Ms. Ruksana Chowdhury, Executive Director, heads the department. Management Information Systems: Functions of MIS department are development of automation for assisting different departments' activities, development of capital market monitoring system based on computerized data analysis, informing all about securities laws and other related matters through its website www.secbd.org, planning, operating, administering and supporting IT infrastructure at SEC and assisting the Commission in related areas. The department is headed by Mr. Md. Ashraful Islam, Executive Director Mutual Fund & Special Purpose Vehicle: Mutual Fund & Special Purpose Vehicle Department deals with registration of mutual funds and special purpose vehicles, their monitoring, supervision and compliance, and any other function related to them. The department is headed by Mr. Md. Hasan Mahmud, Executive Director. Registration & Licensing: Registration Department looks after registration and renewal of all stock brokers, stock dealers, merchant bankers, credit rating agencies, depository participants, authorized representatives, asset management companies, trustees, custodians, and permission regarding branch opening of stock brokers. Licensing of intermediaries help the Commission to discharge its oversight functions more effectively. The department is headed by Mr. Mahbubul Alam, Director Research & Development: Research and Development Department of the Commission conducts investors education program twice a month for the general investors, organize capital market related presentation/seminar for various government and non-government organizations, deals with the Commissions various publications like annual report (Bangla & English), quarterly report(Bangla & English), quarterly Bangla news letter-Parikrama, furnishes

various reports and information to the government and other institutions including Ministry of Finance and different regulatory authorities. The department is headed by Mr. A.T.M. Tariquzzaman, Executive Director. Supervision & Regulation of Markets and Issuer Companies: SRMIC Department supervises stock exchanges and deals with complaints lodged against issuer companies as per securities laws. The functions include monitoring of declaration about sale/purchase/transfer of securities by the sponsor /director of the listed companies, monitoring of monthly shareholding position of sponsors/directors, monitoring of disclosure of price sensitive information of listed companies, approval of transfer of shares of listed companies outside the stock exchange, monitoring all activities of stock exchanges (except securities transactions), taking effective measure to address complaints against issuer, monitoring of AGMs/EGMs and dividend payments for all listed companies. The department is headed by Mr. Md. Anowarul Islam, Executive Director Supervision & Regulation of Intermediaries(SRI): Function of SRI Department is supervision of performing activities of merchant bankers, stock dealers/stock brokers, depository participants, security custodian banks, merchant bankers, security lenders & borrowers and other market intermediaries. SRI department is headed by Mr. Md. Saifur Rahman, Executive Director Surveillance : Surveillance Department keeps vigil on securities transactions in Bangladesh. To identify unlawful trading activities, surveillance department watch and analyze the trading in both the stock exchanges through on-line and off-line surveillance system and prepare daily, weekly & monthly trade reports at the end of trading by pointing market condition and observation of surveillance officials. In order to ensure proper compliance of securities related laws, surveillance department conducts investigation and enquiry against involving parties regarding market manipulation, insider trading & other malpractices, if any. The main purpose of the said activities are to ensure fair-trading and build-up confidence of investors in the securities market. The department is headed by Mr. Md. Ashraful Islam, Executive Director

To expedite the market development process, it may be a good idea to decide on certain milestones and link them to the disbursement of Development Credit Support of the World Bank. The government is making good progress in other sectors, including monetary management, corporatization of public-sector banks and others through this linkage. The missing link between the SEC, Bangladesh Bank, Bangladesh Telecom Regulatory Commission and other regulatory bodies is now getting established. Individually, they were not serving each others' interests, and there was no effective coordination among them, hence the country was deprived of great initiatives. A dedicated financial market cell at the Ministry of Finance could be formed to coordinate with these regulators as well as other ministries. In terms of creating market depth, more profitable state-owned-enterprises should be listed. The

supply of securities can be increased if the SOEs are allowed to operate through the stock exchanges. Floatation of SOE scrips is expected to expand the market by couple of times. Corporatization of SOEs will bring in transparency as well as confidence on the government financial system. The Bangladesh capital market still has a long way to go. The recent measures taken by the transitional government have already begun to positively impact the markets. If more investor-friendly policy reforms were to be implemented, the capital market will undoubtedly play a critical role in leading Bangladesh towards being the next Asian tiger with growth comparable to India, Vietnam and the other most dynamic economies in the region.

Reference: http://www.secbd.org/about.htm http://en.wikipedia.org/wiki/Securities_and_Exchange_Commission http://www.archives.gov/research/electronic-records/sec.html http://www.secbd.org/prospectus.html