BSEC moves to make issue managers accountable

In its first, the Bangladesh Securities and Exchange Commission (BSEC) has moved to be tougher against the issue managers or merchant banks that have brought low-performing companies to the stock market. 

Yesterday, the regulator served show-cause notices on several issue managers as the financial performance of many of the companies they have introduced to the market worsened after their listing.

When a company goes public, issue managers work on behalf of them and give a due diligence certificate that all the information contained in the prospectus is true.

"So, the issue managers are also responsible if listed companies' performance deteriorates without any valid reason," said a top official of the BSEC, preferring anonymity.

In the show-cause notice, the commission said the issue managers managed the initial public offerings (IPOs) in the last few years and provided the due diligence certificate in the prospectus.

"You also declared that all information is true, fair and adequate to enable investors to make a well-informed decision. But the companies have not been doing good since their listing," it said.

The BSEC ordered the issue managers to explain in seven working days why the commission would not suspend their issue management activity.

At least five companies, which were listed in the last 10 years, were downgraded to the Z category for failing to declare any dividend. They are: C&A Textile, Emerald Oil, Familytex BD, Fareast Finance, and Generation Next Fashions, data from the Dhaka Stock Exchange showed.

Besides, the profit of many companies has dropped significantly after their listing.

A stock market analyst welcomed the BSEC's step, calling it commendable as issue managers know a company well, so their integrity is important.

"However, issue managers were not made accountable in the past. They should be made responsible for their IPOs," he said.

There are 67 merchant banks in Bangladesh, according to the BSEC.