Regulator okays discretionary margin account management
The Bangladesh Securities and Exchange Commission yesterday allowed merchant banks and stockbrokers to restructure their clients' margin accounts whose value drops below 150 percent of debit balance.
The commission's move came at a meeting, after requests from Dhaka Stock Exchange.
The discretionary power will allow stockbrokers and merchant bankers to make buy-sell decisions without referring to the client for every transaction until September 30, in a bid to recover the losses in those accounts.
A margin account is an account offered by brokerages that allows investors to borrow money to buy securities. The loan in the account is collaterised by the securities and cash.
As per the securities rules, a stockbroker or a merchant bank is not allowed to make any new transaction in the margin account if the equity falls below 150 percent of the debit balance.
But the current downward trend in the market means the value of equities in almost all the margin accounts has dropped below that level.
A total outstanding margin loan provided by the stockbrokers, merchant bankers and financial institutions stands around Tk 15,000 crore and is increasing, according to the DSE letter.
“But, given the current market conditions, approximately 25 percent of the amount is recoverable,” the DSE added.
At yesterday's meeting, the regulator fined Reliance Securities Service and Island Securities Tk 2 lakh each for exceeding the permissible credit limit under margin rules.
The BSEC also fined Globe Securities Tk 3 lakh for violating securities and margin rules while giving share credit to clients.