Troubled Delta Life’s skyrocketing stock: DSE finds Hero, associates behind

Delta Life Insurance Ltd - the country's first private sector life insurer - had been one of the curious cases in the 2021 stock market where a company's stock price skyrocketed despite rational investors washing their hands off those stocks following negative updates about those companies.

Delta Life and its shareholders have been in continuous troubles since early 2020 when the insurance regulator in a much-disputed move suspended the insurer's board, appointed an administrator, and negative headlines continued to intimidate the analysts.

In contrast to the company's troubles, Delta Life shares in the Dhaka Stock Exchange (DSE) soared to over Tk226 on 26 October last year, from Tk65 in early April and Tk137 on 9 September that year.

A DSE investigation has decoded the mystery and reported its findings to the Bangladesh Securities and Exchange Commission (BSEC) earlier this year.

The premier bourse's surveillance team found controversial investor Md Abul Khayer, alias Hero and his associates behind the 45-day rally in September-October.

Their series of significant transactions accounted for over 58% of the traded Delta Life shares over the said period.

Hero himself, his company, family members, relatives occupied 8 of the top 20 spots of the most active traders of Delta Life shares over the 45 days, while most others in the top 20 are well-known as close to him in the stock market, according to the investigation report.

Their dominance both in the list of top buyers and sellers was done through a series of transactions of the Delta Life shares and in the 45 days they booked over Tk50 crore in capital gains.

It would not be an issue unless they violated the securities law sections that prohibit influencing price, creating false or misleading appearance of active trading of the securities to allure the mass investors, series of buying-selling stocks among themselves in a circular way that ultimately does not change the beneficiary ownership, but influences the market.

DSE investigators found Hero and his associates violating each of the aforementioned parts of the securities law.

In response to the DSE investigation report, the BSEC called Hero for a hearing on 21 April and to show cause why the Commission should not take actions against him and the associates.

"In the hearing I explained my position to the regulator and I believe I violated no securities rules," Abul Khayer Hero told The Business Standard over the phone on Thursday.

"Relatives are not your associates until they financially depend on you," he said.

He also claimed that he and his associates took a position in Delta Life stock with a long-term holding plan.

"The recent price drop of the stock caused an unrealised loss for me," he added. 

The detailed investigation report, however, categorically mentioned which of his and associates' acts violated which sections of the securities law of the country.

BSEC Spokesperson and Executive Director Rezaul Karim said following any investigation report, the BSEC calls the party for a hearing and goes for enforcement actions only if the accused fails to satisfy the commission with the replies.

Abul Khayer and associates' matters regarding Delta Life shares are in a post-hearing phase, he added.

Very recently, the BSEC has formed a probe committee to report on Abul Khayer and his associates' violation of securities law in trading Safko Spinning shares as found by the DSE surveillance.

Abul Khayer, a deputy registrar at the Department of Cooperatives, has allegedly emerged as a mover and shaker of many stocks in the market since the mid-2020.