BSEC seeks govt guidance in appointing independent director in DSE 

The Bangladesh Securities and Exchange Commission (BSEC) has sought government guidance to resolve legal complications concerning the appointment of an independent director at the board of Dhaka Stock Exchange (DSE). 

The BSEC on Wednesday sent a letter to the Financial Institutions Division, requesting instructions based on Section 26 of the Demutualization Act of 2013.

Controversy arose regarding BSEC's appointment of two of the seven newly appointed independent directors — KAM Majedur Rahman and Helal Uddin. However, guidance has been sought only regarding Majedur Rahman.

The letter, signed by BSEC Executive Director Anowarul Islam, said seven independent directors have resigned from the DSE board following the fall of Hasina government, creating a barrier to appointing new independent directors as per the Demutualization Act.

The BSEC said it typically approves the list of independent directors recommended by the DSE's Nomination and Remuneration Committee (NRC). But the committee is currently inactive following the resignation of all its independent directors. 

As a result, to protect the interests of investors, the BSEC, under the special powers given by Section 24 of the Demutualization Act, urgently appointed the seven independent directors on 1 September.

DSE shareholders objected to KAM Majedur Rahman's appointment, arguing that he served as a director at AK Khan Securities from December 2020 to October 2022, and is currently the CEO of AK Khan and Company Limited, the owner of AK Khan Securities.

Similarly, they raised objections against Helal Uddin's appointment, pointing out that he served as an independent director at ICB Securities Trading Company from May 2013 to May 2023. 

According to the Dhaka Stock Exchange (Board and Administration) Regulations 2013, a person cannot be considered an independent director if they have had a business relationship with the stock exchange — either directly or indirectly — as a partner, substantial shareholder, or director of an entity with such a relationship in the preceding three years.

The regulations also disqualify anyone with connections to TREC holders, shareholders of the stock exchange, its directors, or anyone who has been an employee of a regulatory body. 

A senior shareholder of the DSE said the complication in the appointments of Majedur Rahman and Helal Uddin are clearly stated in the law.

"Yet, the BSEC has violated the law by appointing them. Now, seeking guidance from the Ministry of Finance on the matter only highlights the BSEC's weakness," he added.

He further said the commission initially asked them for a list of candidates for the independent directors. "However, BSEC didn't consider the list, which surprised us." 

Meanwhile, the DSE Brokers Association (DBA) in a letter to the BSEC on 5 September expressed concerns the capital market has been in a precarious state due to "anti-investor, non-transparent, and self-serving" decisions by the last two commissions over the past 15 years.

In light of the current situation, the DBA urged the regulator to reconsider the selection process for appointing the seven directors. 

It suggested invoking Clause 24 of the Demutualization Act 2013 to form the Nomination and Remuneration Committee (NRC) comprising four elected directors of the DSE. 

The NRC should then follow the proper procedures to provide their recommendations to the BSEC, the letter said.