Dhaka Stock Exchange (DSE) has submitted a set of proposals to the Securities and Exchange Commission (SEC), aimed at bringing stability to the volatile market.
“We believe the reforms will bring good governance, more transparency and accountability to the issuers' activities, restore investors' confidence and help in the long-term stability of the market,” DSE President Rakibur Rahman said.
One of DSE's recommendations is the introduction of a new listing category named P (premium) to go with the existing four categories, for companies that will pay dividends 30 percent and above.
Firms wishing to be placed in this category will have to comply with international accounting and financial reporting standards, and their earnings per share growth cannot be negative for two consecutive years.
The premier bourse has also recommended making it mandatory for sponsors and directors to sell their shares in block market and not in the public market, to safeguard small investors' interests.
“It has been observed that some sponsors and directors of listed firms take advantage of the market's good performance and sell their shares -- in the public market -- at a high price,” the DSE said in its proposal.
Small investors, who are oblivious of the sponsors and directors' intents, consequently lose their hard-earned money, added the DSE proposal.
The premier bourse also suggested bringing in changes to the listing regulations, such as an issuer will have to publish the usage of its initial public offering (IPO) proceeds in the annual report for three consecutive years after listing.
“A maximum of 30 percent of the IPO fund can be utilised for loan payment,” the DSE proposed.
Furthermore, companies with negative operating cash flow in two of the previous three years will not be listed on the DSE.
No listed company can put any of its land under mortgage without acquiring permission from the SEC and the exchanges, while only government firms will be allowed to make repeated public offers.
The DSE has recommended imposition of some conditions on rights offering by listed companies, too.
The company's sponsors and directors will have to hold a minimum of 30 percent of total paid-up shares, according to the proposal.
A maximum of 20 percent of the rights fund can be used for loan repayment, while the debt-equity ratio has to be 40:60 at most.
For listing with premium value, the company must be in profits for the last five years.
On the amendment of public issue rules, the DSE said the minimum post-issue paid-up capital of the applicant company must be Tk 10 crore.
The minimum IPO size has to be Tk 5 crore and no less than 15 percent of the post-issue paid-up capital.
Sponsors and directors of an applicant company will have to hold shares equivalent to at least 30 percent of the post-IPO paid-up capital.
If a company's IPO price includes premium of up to Tk 15, the IPO quota will be: 50 percent for general public, 10 percent for non-resident Bangladeshis, 10 percent for mutual funds and 30 percent for financial institutions and stock dealers.
For premium value upwards of Tk 15, the quota will be: 25 percent for general public, 10 percent for NRBs 10 percent, 10 percent for mutual funds 55 percent for financial institutions and stock dealers.

[email protected]