PREVENTION OF INSIDER TRADING: BSEC to collect BO account data of sponsor-directors

The Bangladesh Securities and Exchange Commission has initiated a move to collect beneficiary owners’ account-related data of around 3,000 sponsor-directors of 287 companies listed with the capital market in a bid to prevent insider trading.
The initiative came three and a half years after the launch of state-of-the-art surveillance software by the capital market regulator in December, 2012 with a view to checking manipulative share transactions including illegal insider trading.
According to the section 4 (1) of the Securities and Exchange Commission (Beneficiary Business Prohibition) Rules, 1995, no one is allowed to conduct or suggest any sort of beneficiary business.
Despite the regulatory binding, insider trading has been on the rise disrupting normalcy in the market, Dhaka Stock Exchange officials said.
Insider trading includes tipping others when anybody has any sort of nonpublic information, they said.
Sponsor-directors are not the only ones who have the potential to be convicted of insider trading, people such as brokers and even family members of sponsor-directors can also be guilty of the wrongdoing, the officials said.
In recent times, sponsor-directors of a number of listed companies capitalised on price sensitive information as they purchased shares before disseminating those to public.
A BSEC official told New Age last week that preventing insider trading by listed companies’ sponsor-directors was the main reason for the regulatory move (collecting BO account information of sponsor-directors).
‘Without the sponsor-directors’ BO account-related data, it would not be possible for the commission to detect such transactions for ensuring more transparency in the capital market,’ the official said.
According to DSE sources, monitoring only of sponsor-directors’ share transactions would not be sufficient to contain such trading as they (sponsor-directors) sometimes use shadow or anonymous accounts of their nearest persons for this purpose.
When asked, another BSEC official said as the number of employees in the commission to work on the issue was not adequate, the commission initially decided to collect sponsor-directors’ data.
According to a DSE report prepared in May 2012, 225 listed companies had 2,360 sponsor-directors.
In April this year, the BSEC issued a letter to the Bangladesh Telecommunication Regulatory Commission seeking closure of 100 facebook pages which were used by the manipulators to influence share prices. Of the pages, some were used to disseminate insider information of the listed companies.

News Courtesy: www.newagebd.net