The advice came at a meeting between the stock market regulator, merchant banking wings of banking and non-banking financial institutions and stock brokers in Dhaka.

Meeting sources said the SEC wanted to know whether the merchant banks follow the margin rule while giving loans to investors.

The market watchdog also wanted to know whether there is any internal mechanism for giving loans to their employees or relatives to invest in the stock market.

In reply, the merchant bankers said they provide loans under the margin rule while they follow their 'internal code of conduct' for giving loans to their employees or relatives, the meeting sources said.

Around 30 merchant bankers attended the meeting presided over by the SEC chairman.

The SEC held the meeting following a rumour that the merchant banks are giving excess loans to the investors and to their employees, resulting in bullish trend in the stock exchanges.

The capital market watchdog also took several others initiatives recently to stabilise the market following an abnormal hike in share prices.

The SEC on July 23 directed the Dhaka and Chittagong bourses to place shares of five companies under spot trade.

The shares of the companies, which are now being traded on the spot market without any money adjustment facility, are Power Grid Company of Bangladesh, Dhaka Electric Supply Company, Brac Bank, AB Bank and Summit Power.

The market regulator also withdrew financial adjustment facility from trading of B, N and G categories' securities with effect from yesterday to contain the abnormal hike in share prices.

Under the financial adjustment or money netting facility, anyone is allowed to purchase shares of any category of one's choice immediately after completing a sale of any share.

Meanwhile, price indices on the Dhaka Stock Exchange (DSE) declined yesterday due to price correction.

The DSE General Index dropped by 11.01 points, or 0.45 percent, to close at 2390.48 points while the DSE All Share Price Index declined by 10.74 points, or 0.55 percent, to end at 1933.56 points.

A total of 12,872,002 shares worth Tk 193.86 core changed hands on the premier bourse. Of the issues traded, 80 advanced, 105 declined and 20 remained unchanged.