Rules & Legislation Regarding Bangladesh Security Market

Introduction: In order to protect the interest of investors the Government has established Securities and Exchange Commission on 8th June 1993, the main function of which are to develop and regulate markets and ensure proper issuance of securities. This commission act as a Central Regulatory Agency that guides the entire capital markets. Thus a lot of policies and regulations were framed by the Government through the commission to protect and enhance the securities markets helping channelize savings of different investment opportunities. But now-a-days the dual authority of Bangladesh Bank and Securities and Exchange Commission could jeopardize the development and functions of Merchant Banking policy. There are mainly two players in our country who regulate, make rules, acts, in the security markets. These are the Government and Security and Exchange Commission of Bangladesh (SEC). Beside this the two markets Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) are also enable to make rules, regulations regarding their market affairs. Government Regulation: The government has enacted varieties of laws applicable to the securities markets. These laws were the result of certain abuses that took place during the last decade. The collapse of the stock market of Bangladesh in 1996 provides an impetus for the regulation of securities trading. Securities markets regulating authority of Bangladesh along with the investors recognize that the regulation of securities markets is necessary in order to restore the confidence of the investors in the markets and ensure a continuous flow of capital in business. The basic laws under which the transfer of stocks and bonds are being regulated are the securities and exchange ordinance, 1969, and Securities and Exchange Commission act, 1993. The principles objectives of these laws are to protect the suppliers of capital from fraud and to ensure that information received by investors is truthful, accurate, complete, and reliable. Laws launched and imposed by the regulating authorities SEC attempt to achieve these goals by way of disclosing all material information affecting the price of a security, controlling the insider activities, and controlling the issuance of new stocks

favorable nor unfavorable information from the public. The actual implementations of full disclosure sometimes present problems, which must be turned over to corporate counsel. Corporate directors, officers and shareholders (who are called insiders) are not permitted to profit from inside information. Transactions made by such insiders must be reported to the security and exchange commission. The SEC publishes reports of insider trading showing the names of insiders involved in trades. Corporate insiders are permitted to trade in the stock of their corporation if the comply with the reporting requirements although they are not permitted to make short term abnormal profit by selling short. Laws have been established to ensure that information provided to investors in prospectuses for new stocks is accurate and complete. For the sake of the investors protection in the securities markets, government has enacted various regulations as needed time to time. Government Legislation: Many fraudulent and undesirable practices occur in the securities markets-both in primary and secondary markets. To improve the stability and validity of the securities markets, more acts, rules and regulations have been legislated by the government after establishments of Securities and Exchange Commission in 1993. A tremendous development in the securities markets is possible if the legislations come into effect. Major legislations regulated in the securities markets that are liable to give protection to the investors in the securities markets. The following are the regulations regarding the legislation to protect the interest of investors. Regulations of Securities and Exchange Commission: In mixed economies like Bangladesh, the major part of domestic savings takes place in the private sector. The domestic saving rate is positively related to the level of income and its growth rate. To raise the saving rate one must understand the savings preferences and motives of the non-corporate sector of the country. Economic history of some developing countries suggests that in the evaluation of the financial structure, the non corporate sector prefers to hold more than 50 percent of its financial savings in the form of savings and fixed deposits. Security markets in Bangladesh well established in 1954 while the formal trading began in 1956. Their activities are being controlled and regulated by the article of association along with other government regulations subject to amendment from time to time. The capital issue Act, 1954, however, is one of the pieces o legislation governing the stock exchange in the country.

Consequently upon, with the spirit of the nationalization and socialization motive of the government, the then only securities market in Bangladesh, The Dhaka Stock Exchange Limited suspended its trading and other administrative activities in 1971 after the independence of the country later 1976 it regimes it activities with 9 listed companies after the changes of government policies. Activities of the security market improve since 1985 and gained momentum from early 1991. Efficient and effective operation of sectors market is required to meet at least two basic requirements. First one is to support industrialization through savings mobilization, investment fund allocation and maturity transformation. Second one is to be satisfy and efficiency in discharging the above role. In the developing country like Bangladesh such conditions do not prevail due to the prevalence of informal credit market. It performs various functions in process of economic development of a country like Bangladesh. The practices and the supervision of issuers, market and intermediaries are vested upon regulatory authority. The board of SEC is the policy making and overseeing body and the regulatory functions are taken care of by chairman and members. All the components of securities markets should be concerned with the investors protection it is essential to say that the legal protection of investors in a country is an important determinant of the development of its financial markets. Where laws are protective of outside investors and enforced, investors are willing to finance firms, and financial markets are both boarder and more valuable. Keeping this view in mind, the government of Bangladesh has set up Securities and Exchange Commission (henceforth SEC) on June 8, 1973 under the security and exchange commission act, 1993. Security Exchange Commission is an independent quasi-judicial agency of the government, the mission of which is to administer law in the securities field and to protect investors and the public in securities transactions. Consistent with the overall policies, SEC is supposed to act as a central regulatory agency performing wide range of functions covering the entire capital market including the proper issue of capital, the establishment of fair trading. Areas of legal coverage: The Securities and Exchange Commission was established under the Securities and Exchange Commission Act, 1993 to protect the interest of the investors in securities markets. Under the act, rules and regulation there under, the commission is supposed to perform the following functions:

1. To ensure the issuance of securities properly. 2. To promote and regulate the Bangladesh capital markets. 3. To regulate the activities of the stock exchanges. 4. To register and regulate the activities of intermediaries like stock brokers/dealers, underwriters who are associated with the securities markets. 5. To monitor the activities of any collective scheme like mutual funds. 6. To monitor the functions of all authorized self-regulatory organizations in the securities markets. 7. To prohibit fraudulent and unfair activities in the securities markets. 8. To prohibit insider trading in securities. 9. To introduce and promote investor education and training regarding to the securities markets. 10. To regulate substantial acquisition of shares or stocks and take over the companies. The SEC Acts, Rules and Regulations The Securities Acts: Securities and Exchange Commission Act, 1993: It is expedient for the establishment of the Securities and Exchange Commission for the purpose of the protection of interest of investors in securities, for the development of the securities markets toward achieving the objectives of the securities investors. To protect the interest of the investors in securities, the securities and exchange commission can apply all the power under the code of civil procedures, 1908 (Act V of 1908) with a view to investing into the affairs of brokers, sub-brokers, share transfers agents, bankers to an issuer, underwriters, portfolio managers, investment advisers and such other intermediaries associated with the dealing in securities markets. The depository act 1999: The act has effects on any other law for the time being relating to the holding and transfer of securities. To avoid any fraudulent a transfer of securities must be effective by making an appropriate entry in the depository register as per provision of the

regulation as per provision, the commission preserves the right, for the interest of the investors to issue an order and direction to any person associated with the depository or with the issuer. Securities and Exchange Commission rules: SEC Rules Part-II: A profit and loss account asserts the profitability of a firm. S the profit and loss account is the disclosure of profit or loss of a company, the commission makes the listed companies to disclose clearly the result of the working of the companies during the period cover by the account. SEC Rules Part-III: Under the purview of this rule, the assets, liabilities, debts, reserve and other provision of the listed companies are defined and the treatment of these terminologies should be compliance with the securities and exchange rules, 1987. Meeting Rules, 1994: In exercise of the power conferred by section 25 of the Securities and Exchange Commission act, 1993 the commission should hold at least six meeting every year in regards to the matters protecting the interest of the investors. Credit Rating Companies Rules, 1996: No issue of debt security, or public issue of shares (including rights share) at a premium, shall be made by an issuer unless the issue is rated by a credit rating company and declaration about such rating is given in the offer document, prospectus or rights share offer document, as the case may be: Provided that the Commission may by general order which shall be notified in the official Gazette grant exemption, in the interest of the capital market, from any requirement of the rule. Commence business as a credit rating company shall be illegible for registration under these rules if it fulfils or complies with the following conditions or requirements, namely:(a) that such company is incorporated as a public company under the Companies Act, 1994 (Act No. 18 of 1994). Public Issue Rules, 1998:

Any issuer or its representative violating any of the provision of rules or furnishing false, incorrect, misleading information or suppressing any information that hampers the interest of the investors, the Securities and Exchange Commission may impose penalty as prescribed under the securities and exchange ordinance, 1969. Right Issue Rules, 1998: To protect the investors interest, the companies offering the right shares must make and offer the proper documents referring the financial year for which the dividend is to be declared, date of the dividend declared as per the provision of the right issue rules, 1998. Margin Rules, 1999: In exercise of the power conferred by section 33 of the securities and exchange ordinance, 1969, SEC controls the members regarding the credit facilities to their approved clients for securities transactions subject to the margin account requirements of these rules. Contravention of any of the provisions of these rules shall be punishable under the provision of the securities and exchange ordinance, 1969 (XVII OF 1969), the rules and regulations made there under, and the bye-laws of the stock exchange as well. Issue of Capital, Rules, 2001: A company (thereinafter referred to as the applicant) intending to issue capital in Bangladesh shall make an application to the Securities and Exchange Commission for consent. The application shall contain the following particulars, namely:(a) Name of the company; (b) Address of the registered office; (c) Telephone number; (d) Fax number and e-mail number, if any; (e) Date of incorporation; f) Date of commencement of business; (g) authorized capital; (h) paid up capital;

(i) amount of capital to be issued; (j) Face value of shares; and (k) Period within which capital to be issued. The applicant whose application has been rejected by the Commission under rule 3(4) may apply to the Commission for review of its decision within thirty days from the date of such rejection, and the decision of the Commission thereon shall be final. The applicant shall pay an amount of taka five thousand (nonrefundable) as application fee, along with the application, by way of pay order or demand draft issued in favor of the Commission. OVER-THE-COUNTER RULES, 2001: The issuer of an unlisted or delisted security shall apply to the exchange, as designated by the Commission, through a stock dealer/ stock-broker in the form prescribed by the exchange For availing the OTC facilities in buying and selling of securities on the payment of prescribed fee to the exchange. The exchange shall receive, in advance, the securities at OTC from the selling stockdealer/stock-broker against issuance of an official receipt to him mentioning details of such security, including the selling price, commission or charges separately, for subsequent payment to the selling stock dealer/stockbroker after sale of the concerned securities by the exchange. PUBLIC ISSUE RULES (Review), 2006: Upon receiving the consent of the Securities and Exchange Commission to the issue of capital under this Rules, the abridged version of the prospectus, as approved by the Commission, shall be published by the issuer in four national daily newspapers (in two Bengali and two English), within the time specified in the letter of consent issued by the Commission. The full prospectus shall, however, be posted on website of the SEC, stock exchanges, issuer and the issue manager RIGHTS ISSUE RULES (Review), 2006: Conditions to be fulfilled prior to making rights issueAn issuer of a listed security may make rights issue by issuing rights share offer document subject to compliance with the following.

Pricing and ratio of rights share The issuer of a listed security making rights issue shall determine the price of its rights share in consultation with the issue manager. Filing of the application for rights share offer An application for issuing rights share along with offer document shall be furnished to the Commission for approval within fifteen days of approval of such issue by the shareholders of the company in a general meeting. Public announcement for rights issueThe issuer of a listed security making offer for rights issue shall:-Announce two separate dates, for record date, one for shareholders decision regarding the proposed rights issue and the other for determination of entitlement of rights issue after the Commission accords approval. Approval fee on rights shareThe issuer of a listed security shall deposit approval fee with the Commission for the rights issue at 0.15% of the total offered amount of rights issue, including premium, if any, by a bank pay order or demand draft issued in favor of the Securities and Exchange Commission within seven working days from the date of according said approval. Subscription Subscription shall be received through the banker to the issue during the subscription period of not less than fifteen days and not more than thirty days. Netting facilities Rules, 2007: The Securities and Exchange Commission on 30 January 2008, in the in the Interest of investors and securities market, rescinded its Directive No-SEC/SRMID/94-231/1356 dated 30 July 2007, which shall be effective from the trading day of 3 February 2008. The 30 July 2007 directive had suspended the mechanism for adjustment of total buy with total sale of scrips. Opening branch offices of brokers Rules, 2008:

The SEC has prepared a guideline in the interest of investor and development f securities market which will be followed by Brokers to obtain approval of the Commission prior to opening branch offices. Maximum rate of margin loan Rules, 2008: As per SEC Order dated February 03, 2008, the maximum rate of margin loan for Merchant Banker (Portfolio Manager) has been re-fixed @ 1:1 by SEC. Based on this, Merchant Banker (Portfolio Manager) can provide loan to their clients up to that ratio with effect from.10th February,2008 until further Order. In case of considering market price of portfolio/securities, the Instruction no. 7 of SEC (Merchant Banker & portfolio Managers) Regulations, 1996 must be ensured. the earlier order of SEC dated 25th November 2007 Regarding this issue will be considered as amended. Securities and exchange Commission regulations: Merchant Banker and Portfolio Manager Regulations, 1995: The merchant banker shall preserve books of accounts and other books and documents maintained for a period of twelve years. In this connection, no merchant banker or any of its directors, partners or managers or any officer o N their respective accounts or associates or relatives can enter into any transaction in securities of the company on the basis of unpublished price-sensitive information obtained by them during the course of nay professional assignment either form the customers or otherwise under the provision of merchant banker and portfolio manager regulation, 1995. Prohibition of Insider-trading Regulation, 1995: Under the section 25 of the Securities and Exchange Commission act, 1993 (XV of 1993) transaction of any security by any insider on the basis of price-sensitive information is prohibited. If any person being a stock broker or stock dealer or authorized representative or any other intermediary licensed for dealing in securities contravenes the provision of this regulation, the Securities and Exchange Commission may cancel or suspend it license. The commission may also take different necessary actions according to the law in force against any person concerned failing to produce any document, books of accounts or any other information in accordance with the direction of the inquirer working for the commission. Appeal Regulation, 1995:

Any person being any company, body incorporate, partnership firm of any other organization aggrieved by an order of a member or an officer of the commission may prefer an appeal to the commission under the Securities and Exchange Commission (Appeal) regulation, 1995. Mutual Fund Regulation, 1997: In exercise of the powers conferred by section 25 of the securities and exchange commission act, 1993 (Act No, 15 of 1993), the commission makes some regulations to protect the interest of the investor, as for example, a penalty of cancellation of registration of mutual fund may be imposed when indulges in manipulation of price rigging or any activity affecting securities markets and the investors interest as well. Action may also be taken against mutual funds when its financial position deteriorates to such an extent that the commission may consider that its continuance is not in the interest of the investors. Depository Regulation, 1999: Under the purview of the depositories act, 1999, the Securities and Exchange Commission, by the depositorys regulations, 1999 may seek further document or information for the consideration of an application. If any document or information furnished to the commission by any depository is found to be incorrect or misleading in material particular after the grant of the registration certificate, the said certificate may be cancelled. If the Commission finds that, it is not suitable to protect the interest of and helpful to capital market, it may reject the application mentioning the reasons thereof. Self-Regulations: The stock exchange (both DSE & CSE) regulate and monitor trading and all activities of broker/dealer and the listed firms as well for the benefit of the investors and for the safeguard of the financial system. The exchanges regulate themselves as part of combined effort involving the SEC itself and member firms. During a typical trading f=day the exchanges continuously monitor all market participants. They also monitor the performance of brokers, dealers and specialists in their responsibilities for maintaining a fair and orderly market on the stocks they are dealing. After the market crash in 1996, DSE has instituted several measures one of which is called circuitbreaker to reduce the market volatility and serve the investors best interest. Bangladesh Association of Publicly Listed Companies (BAPLC): BAPLC is a trade association formed by the public listed companies in the stock exchange to enhance the self-regulation of the securities industry. In collaboration

with the commission it watches the matters relating to the interest of the investors and the capital market as well. For the better understanding of the market indicators, the DSE has established a new selective index of best 20 companies entitled DSE-20 from January 2001 and CSE did the same thing with best 30 companies listed with it entitles CSE-30 form January 2000. Dhaka Stock Exchange The Dhaka Stock Exchange (DSE) is registered as a Public Limited Company and its activities are regulated by its Articles of Association rules & regulations and bye-laws along with the Securities and Exchange Ordinance, 1969, Companies Act 1994 & Securities & Exchange Commission Act, 1993. Function of DSE The major functions are: 1. Listing of Companies.(As per Listing Regulations). 2. Providing the screen based automated trading of listed Securities. 3. Settlement of trading.(As per Settlement of Transaction Regulations). 4. Gifting of share / granting approval to the transaction/transfer of share outside the trading system of the exchange (As per Listing Regulations, 42). 5. Market Administration & Control. 6. Market Surveillance. 7. Publication of Monthly Review. 8. Monitoring the activities of listed companies. (As per Listing Regulations). 9. Investors grievance Cell (Disposal of complaint by laws 1997). 10. Investors Protection Fund (As per investor protection fund Regulations 1999). 11. Announcement of Price sensitive or other information about listed companies through online. The DSE Acts, Rules and Regulations Dhaka Stock Exchange rules:

Circuit Breaker Rules, 2004: Since March 20, 2004 circuit breaker has been withdrawn from Z category shares have been widen. Share prices under these categories are now allowed to fluctuate between 7.5% and 20% depending on days market value per share. The existing circuit breaker limits on A, B & G category shares are as follows: Up to Tk. 200 20% but not exceeding to Tk. 35 201 to Tk. 500 17.5% but not exceeding to Tk. 75 501 to Tk. 1000 15% but not exceeding to Tk.125 1001 to Tk. 2000 12.5% but not exceeding to Tk. 200 2001 to Tk 5000 10% but not exceeding to Tk. 375 5001 & above 7.5% but not exceeding to Tk. 600 Investors Portfolio account Rule, 2004: Transaction of the foreign Portfolio Investors As per directive of Securities and Exchange Commission dated 8th October 2002 all transactions of the foreign Portfolio Investors in the secondary market are to be made either through portfolio accounts opened with a portfolio Manager registered under the Securities and Exchange Commission (Merchant Banker and Portfolio Manager) Rules, 1996 or through nonresident investors having accounts with a schedule Bank in Bangladesh and Exchange Commission for providing custodian banking services for investment in shares and securities. Settlement and Clearing Period Rules, 2004: For A, B and G category securities, the settlement and clearing period have been further changed in the following manner: For Settlement T+1= between broker/ dealer and clearing house For Clearance T+3= between clearing house and broker/ dealer Treasury bond Rules, 2005: For the interest of the investors and securities market, transactions of the Govt. Treasury Bonds started in the Dhaka Stock Exchange on January 01, 2005 as per Directive of SEC. The bondholders can receive coupon interest on the governmentapproved securities on a half-yearly basis after deduction of taxes as follows:

Name of the Securities Coupon rate a) 5 years Bangladesh Govt. Treasury Bond 7.5% payable on half-yearly rest b) 10 years Bangladesh Govt. Treasury Bond 8.5% payable on half-yearly rest Settlement cycle for Z category companies changed Rule, 2006: The settlement cycle for Z Category Company (as per the decision of SEC) changed to T+3 and T+7 instead of existing settlement cycle of T+4 and T+7, which came into effect on December 17, 2006. Inter-category Financial Adjusting Facilities Provided Rules, 2006: According to a decision of SEC on December 5, 2006 inter-category financial adjustment facilities will be provided in respect of transactions in A, B, G and N category scraps in this decision also allowed financial adjustment facility to B, G and N categories also, in addition to A. Due to this decision any investor can buy any securities under A, B, G and N categories against sale proceeds of any securities under those categories in the same day with the effect from December 10, 2006. This facility is allowed in the Public, Block and Odd Lot Market only and Spot and Foreign Market will remain out this facility Deferment of compliance of margin rules, 2006: SEC has decided to keep in abeyance the Compliance of Margin Rules 1999 by brokers/dealers, according to the decision of the stock brokers/dealers. Due to the decision, the stoke brokers are now allowed to execute purchase or transaction of shares on behalf of an investor without instant cash or pay order. BO Accounts Annual Fee Rules, 2007: The Securities and Exchange Commission (Depository Act, 1999 and Section-17) in a notification ordered all the Beneficiary Owner (BO) Account holders to deposit Tk. 300 for very account per year within a fixed time. On failure of payment of the said amount of money the BO account will be cancelled. To facilitate the fair flow of securities trading and to encourage a completely fair ground for the real investors the SEC under took this Strategy. Bank Statement containing particulars for BO Accounts Rules, 2007: The SEC, in an order (Depository Act, 1999, Section -14) instructed all to Submit Bank Statement Containing Applicants name, Bank Account No, and also signature at the back of photographs which must be similar to the signature he or she gave at the

time of opening the Bank Account. On failure of providing Bank Statement following these terms and conditions the BO Accounts will be closed after six months. Margin Rule, 2007: The SEC, according to its (Merchant Bankers Rule and Portfolio Manager ) Rules, 1996 and Section-36 (Direction-6, (1), remixed the maximum use of 1:0,5 which come into effect on November-26, 2007 and until further notice disbursable loan meaning half of clients capital (cash and security) may be disbursed. Transfer of IPO securities from Closed BO accounts Rules, 2008: The commission receives requests from individual investors and issuers on behalf of investors for to transfer of IPO securities from the respective investors closed BO accounts to New BO accounts. For this purpose the investors/issuers are required to send applications to SEC attaching the copies of old BO account set up reports and its closing reports, new BO Account set up reports, IPO securities allotment letters and other relevant papers. The commission examines the consistency of information contained in the said documents in according approval to transfer of securities. Henceforth, until further order, the concerned issuers will examine the aforesaid papers and after being satisfied the respective issuers will approve transfer of IPO securities from closed BO accounts to new BO accounts. In such cases no approval is required from SEC. Dhaka Stock Exchange Regulation: DSE Investors Protection Fund Regulations, 1999: It is expedient to frame regulations for establishing a fund for the protection of the investors of defaulting member of the DSE. In exercise of the powers conferred by section 34 of the securities and exchange ordinance, 1969 (Ord. XVII of 1969), the DSE makes, with the approval of the securities and exchange commission, the board of trustees of the fund to have the entire control over the administration and management of the fund and shall be vested with all the powers authorities and discretion necessary or expedient for that purpose in addition to any express powers conferred by these regulation. DSE Automated Trading Regulations, 1999: In exercise of the powers conferred by section 34 of the securities and exchange ordinance, 1969 (Ord. XVII of 1969), the DSE may regulate the market control parameters such as tick size, market lot, minimum block size, maximum block size, minimum order size, maximum order size, closing price minutes, closing price traders,

circuit breaker, circuit filter, market protection percentage, index calculation frequency, etc. under intimation to SEC. however, the system shall automatically enforce the price limit regulation/orders, which shall reject any order beyond the price limit set under the price limit regulation/orders. Being empowered under this regulation the DSE may also regulate the net limit for a member. A member exceeding the limit shall be automatically suspended by the system under immediate intimation to SEC. Members Margin Regulations, 2000: The Securities and Exchange Commission has further modified the regulation of Members Margin, 2000 as follows: Regulation 3 has been substituted as the following-3. Free limit up to Tk. one crore per trading day Regulation 4(3) has been substituted as the following Every member shall deposit the members margin with the clearing house on the additional trade exposure at the following rates: A) Above Tk one crore @20% B) Above Tk two crore @30% C) Above Tk three crore @50% D) Above Tk five crore @100% Direct listing of public limited company, 2001: Dhaka Stock Exchange Ltd, (Direct listing of shares of public limited company) Regulation. 2001 has come into effect from 9th October, 2001. For the first time in the history of Bangladesh Capital Market, public limited companies will the DSE. Companies having a paid-up capital of at least Taka three core and operational performance for at least three years with two years profit record, without having any accumulated loss in its financial statement and having no record of annual general meeting default will qualify to get listed with the DSE. Pay off declared Dividend Regulation, 2004: If A or B category company fails to pay off declared dividend within the prescribed time limit its share shall be placed in Z category. On the other hand if a Z category company declares dividend its shares shall be placed in A or B category as the case may from the next day of SEC, confirming paying off the declared dividend within the prescribed time limits.

Direct Listing Regulation, 2005: To facilitate the companies with good fundamental to offload a part of its existing shares through capital market, SEC has approved direct listing regulation. Now interested and sound companies can get listed on the bourses directly and enabling them to sell their shares to investors directly without the rigidity of floating shares through IPO. The requirements for eligibility of a company to get listed directly are: * shall have minimum paid up capital of Tk. 100.00 million * shall have no accumulated loss * shall be commercial operation for at least immediate last five years * Shall have profit in three years out of the immediate last five completed accounting/financial years with steady growth pattern. * Is regular in holding Annual General Meeting (AGM). Corporate Governance Guidelines Regulation, 2006: SEC has launched corporate governance guidelines for the listed companies on comply or explain basis aiming to ensure corporate governance accountability and practices in Bangladesh. This includes provisions, for the first time, to constitute an audit committee and to appoint independent directors in a listed company. Sponsors or directors of Z-category companies Trading Regulation, 2008: The Securities and Exchange Commission on 15 January, 2008 in a notification said in the interest of investor and securities market, the sponsor or director of companies listed on the stock exchanges and placed under 7 ere gory should be barred from trading for implementing the Notification No.SEC/CMRRCD/200114/Admin/03/06dated 1st August 2002, published in Bangladesh Gazette on 7th August 2002, for tasty being. Now, therefore, with a view to facilitating the above, the Securities and Exchange Commission, in exercise of the power conferred by section 20A of the Securities and Exchange Ordinance Stock Exchange to ensure that no sponsor or director shares of those Z category at Dhaka Stock Exchange and Chittagong Stock Exchange to ensure that no sponsor or director shares of those Z Category companies, excluding bank, insurance and financial institution, are transacted on the stock exchanges or transferred outside the stock exchange in any other from until further order. The Share price movement Regulation, 2008:

The Securities and Exchanges Commission on 16 January 2008 directed the Dhaka Stock Exchange and Chittagong Stock Exchange to make the following further amendment in the existing Guideline for Regulating the Share price Movement in the Stock Exchanges Trading, which Shall take effect from 17 January 2008, namely The existing price limit prescribed for A,B,G, and N-Category companies shall also be applicable for Z-category companies Problems of Stock Markets in Bangladesh: After the commencement of the Securities and Exchange Commission, various laws, rules, regulations and numerous policies implication become sine-qua-non to govern the security markets and the investment industries in the country. The followings are the major abuses regarding the securities trading: Fraud: By applying any fraudulent activity a dishonest player in the securities market can earns abnormal gain that hampers the interest of the relevant facts. Illegal solicitation: It occurs when a broker or dealer sells securities without first giving the investors prospectus that reveals all the relevant facts. Churning: It involves an abuse of the customers confidence by a securities broker by the transactions disproportioning the size and nature of clients account with view to generating commission for the broker. Cornering: A securities market becomes corner when a price manipulator owns the total supply through buying all the available securities and controls over the price. Matched order: A matched order involves illusory transactions in which two individuals act the same task. The co-conspirators create a record of trade and give the impression that delivery was made without a true change in ownership occurring. Insider trading: Insider trading occurs when securities transactions are made based on material nonpublic information that was obtained in breach of a fiduciary trust. Unauthorized trading: It occurs when a clients account shows securities trades that were not authorized verbally or in writing the client before the transaction occurred. Suggestions to improve the activities of Stock Market: * To introduce automated monitoring system that may control price manipulation, malpractices and inside trading. * To introduce full computerized system for settlement of transactions.

* To force the listed companies to publish their annual reports with actual and proper information that can ensure the interests of investors. * To control and abolish curb market form premises of stock market. * To take remedial action against the issues of fake certificates. * The composite Quotation system (CQS) should be introduced and implemented that available the exchange specialist bid-ask quotes to the subscribers. * To make arrangement to set-up merchant banks, investment banks and floatation of more mutual funds particularly in the private sectors. * Banks, insurance companies and other financial institution should be encouraged deal in share business directly. * The brokers should not be allowed to deal in the Scripps on their own accounts. * The management of DSE and CSE should be vested with professionals and should not in any way be linked with the ownership of stock exchange and other firms Conclusion: All the discussion concludes that, the rules, regulation, laws and amendments of Government, DSE, SEC, and CSE are to protect the interest of interest as well as the whole security market. Most of the time, SEC, DSE, CSE, and Government change these rules, regulations, amendments, and laws to protect the interest of the investors. These rules, regulations, amendments, and laws to protect the interest of the investors may be for the long time or for the short time period. These rules, regulations, laws states that any kind of work that do not supported by these will be estimated as illegal. From above all the discussion we can tell that, if all the investor who invest their capital in the security market should follow the rules, regulation, laws and amendments to prevent themselves from any kind of misconduct. Because all the rules, regulations, laws and amendments issued by the Government, SEC, DSE and CSE is to protect the interest of the investor