Regulator forms body to probe Beximco Sukuk, IFIC Amar bond, other stock scams

Infographics: TBS

The Bangladesh Securities and Exchange Commission (BSEC) has formed a probe committee to investigate past irregularities, manipulation, and corruption in the capital market including issues related to Beximco Sukuk and Sreepur Township bonds linked to Salman F Rahman.

The committee will also examine the selection of ABG Limited, a concern of Bashundhara Group, as a strategic investor in the Chittagong Stock Exchange, its acquisition and pricing of stock exchange shares, as well as Best Holdings Ltd's Tk450 crore raise through the book building method and its IPO issues.

The committee will be headed by Zia Uddin Ahmed, chairman of Terra Resources International and VIPB Asset Management. It will investigate 12 issues in the first phase and submit a report to the commission within 60 days.

The commission took the decision at a meeting today presided over by its chairman Khondoker Rashed Maqsood.

The other members of the committee are Yawer Sayeed, former MD of Aims Asset Management, Shafiqur Rahman, former member of the NBR, Barrister Md Zeeshan Hyder, deputy attorney general and Anowarul Islam, executive director of the BSEC.

According to the notification, the commission may add new members to the probe committee if needed.

A BSEC press release states that the committee will investigate irregularities and manipulation involving Al Amin Chemical Industries, Sonali Paper and Board Mills, Fortune Shoes, ACME Pesticide, Quest BDC Coppertech Industries, and Emerald Oil.

The investigation will also cover Ring Shine Textiles' fund-raising through private and public offerings, exaggerated sales figures in annual reports, and allegations of money transfer and laundering through bank accounts.

These irregularities occurred during the tenures of M Khairul Hossain and Shibli Rubayat Ul Islam as BSEC chairman after 2010. Both are faculty members at the University of Dhaka.

Khairul Hossain, professor of Finance at Dhaka University, was the longest-serving chairman of the BSEC.

Shibli Rubayat Ul Islam, from the Banking and Insurance Department at the same university, was appointed chairman in 2020 for a four-year term, which was extended for another four years upon expiration.

However, he resigned on 10 August following the fall of the Awami League government on 5 August.

During their tenure, numerous irregularities occurred in the capital market, yet no stringent measures were implemented. Fundamentally weak companies were permitted to raise public funds through IPOs without adhering to regulations.

Appointed post-2010 market crash to reform the capital market, their tenure saw little progress in market development, with investor confidence eroded by share manipulation and irregularities, according to market stakeholders.

Tk3,000 crore Sukuk bond of Beximco

The commission permitted Beximco Limited, owned by Salman F Rahman, the private investment and industry advisor to former Prime Minister Sheikh Hasina, to raise Tk3,000 crore through Sukuk bonds, a Shariah-compliant debt instrument.

Sukuk bond was another new financial instrument that was introduced for the first time in the country and banks were forced to invest in the bonds.

Earlier in 2021, Beximco floated a Tk3,000 crore Sukuk bond – the first-ever asset-backed securities by a private sector entity in Bangladesh – to finance its two solar power plants and for expansion of its textile division.

Later, Beximco used the Bangladesh Bank (BB) to issue a circular allowing banks to invest in Sukuk bonds from the capital market special fund which would be excluded from capital market exposure.

Banks can invest 25% of their capital into stock, as per the banking act.

However, Salman F Rahman secured a Tk1,000 crore bond guaranteed by IFIC Bank for his new real estate venture – Sreepur Township Limited (STL) – months before the last national election. Salman is also the chairman of IFIC Bank.

Salman, vice-chairman of Beximco Group and later a lawmaker, was arrested on 13 August, triggering extensive debate over his use of public office for personal gains.

Bashundhara's ABG also under investigation

In September 2022, the BSEC approved a proposal from the Chittagong Stock Exchange (CSE) to make ABG Ltd its strategic partner.

ABG Limited, a concern of Bashundhara Group, a leading conglomerate in the country, purchased 25% of the CSE's shares, valued at Tk2.40 billion, with each share priced at Tk15.

In August of that year, the CSE applied to the BSEC for approval of this transaction.

Earlier in 2022, cricket superstar Shakib Al Hasan, through his two firms and his allies, acquired 48.175% of the shares from the sponsors and directors of Al-Amin Chemical Industries, a company listed on the OTC platform.

Monarch Mart Limited and Monarch Express Ltd purchased 2.4% and 4.8% of the shares, respectively.

Eshaal Communication Ltd, represented by Aminul Islam Sikdar and Md Khairul Bashar, bought 14.4% shares of Al-Amin Chemical.

Lava Electrodes Industries bought 2.4%, AFM Rafiquzzaman 10%, Mashuk Alam 6%, and Munshi Shofiuddin bought 8.175% shares of the company.

The company raised Tk25 crore without the BSEC's consent, violating several laws and regulations. Upon identifying these violations, the DSE rejected its application to move from the OTC board to the SME board. Later, the BSEC granted post-facto approval for the capital raise.

The probe committee will also investigate individuals involved in the manipulation of Fortune Shoes shares, including irregularities such as failure to distribute declared dividends and artificially inflating the company's share price.

The DSE identified irregularities in the change of ownership of Quest BDC and subsequently cancelled its application for listing on the SME Board.

After Minori Bangladesh acquired Emerald Oil Company from its previous owners, there were incidents of share manipulation.

Although the Spandan brand, under the company, resumed production after the ownership change, production has now halted due to a gas shortage.

Sonali Paper and Board Mills, a concern of Yunus Group, had its transactions moved from the OTC market to the main market during the Shibli-led commission's tenure.

Since then, the company's share price has been rising abnormally, but the Shibli-led commission did not take any action despite an investigation by the stock exchange.