Part 4

Review of

Securities Market in Bangladesh: A

Critical Appraisal of its Growth Since

its Inception in 1954

Securities Market in Bangladesh: A Critical Appraisal

Reforms Made during 1997-2002

Major Reforms Made during 1997-2002:

Strengthening market regulation and supervision;

Developing capital market infrastructure;

Modernizing capital market support facilities;

Increasing the limited supply of securities in the market; and

Developing the institutional sources of capital to improve demand for securities

Securities Market in Bangladesh: A Critical Appraisal

Strengthening Market

Regulation and Supervision

SEC authorized to make by-laws without the prior approval of government.

Increased organizational strength of SEC.

Introduction of prior approval of SEC before registration of companies in the Market.

Introduction of weekly investor education program by SEC.

Securities Market in Bangladesh: A Critical Appraisal

Developing Securities Market

Infrastructure

Restructuration of the boards of the DSE and CSE.

Separation of policy makers and management body of DSE.

Mandatory dual listing in both DSE & CSE was cancelled to encourage competition.

Introduction of requirements of the listed companies to submit financial statements to

the SEC.

Securities Market in Bangladesh: A Critical Appraisal

Modernizing Security Market

Support Facilities

Open outcry changed to automated trading system

Depository Act 1999 created the Central Depository of Bangladesh Limited (CDBL)

Securities Market in Bangladesh: A Critical Appraisal

Measures for Increasing the

Supply of Securities

Disclosure-based Regulation

Package of Tax Benefits offered:

10% tax rebate for companies declaring 25% dividend

Reduction of corporate tax rate from 40 to 35%

Registration charges fixed

Licenses given to various merchant banks

Promulgated separate rules to facilitate rights and secondary issues

Issuance of mutual funds

Securities Market in Bangladesh: A Critical Appraisal

Measures for Improving

Demand of Securities

Enables trust funds to invest in securities (25%)

Any insurers funds will be invested in various securities (30%)

Investment Corporation of Bangladesh divided for providing better services (3

subsidiaries)

Credit Rating Information and Services (April 2002)

Saving bonds situation (8 savings bonds, 4 closed)

Securities Market in Bangladesh: A Critical Appraisal

Stamp duty withdrawn

Tax exemption threshold increased (40,000 from 30,000 Taka)

Maximum amount of tax free investment in IPOs increased (.25M

from .2M Taka)

Listed companies divided according to performance (A, B and Z)

Measures for Improving

Demand of Securities

Securities Market in Bangladesh: A Critical Appraisal

Incentives Offered to

Foreigners and NRBs

Treated equally in terms of capital gains and dividends

Avoidance of double taxation

Granting multiple entry visa (6 months)

Foreigners to be offered citizenship (US$ 0.5M, US$1M)

Permanent residentship (US$ .75M)

Quota reserved in new issue of securities (10%)

Maintain foreign currency deposits