Forma # 1.ai - ICAB

On one occasion, those who hold the private placements were able to siphon off a considerable amount
of money by selling shares at a high price within the span of one month after the offloading of the shares.
As a result, share price of the company fell by 33 per cent within one month and by 50 per cent in next
two months and did not rise thereafter (Figure 15). Capital flight during the first 15 days of the transaction
of the shares of this company is estimated to be at least Tk. 83.7 crore. Similarly, in case of yet another
company, only in the first two days of trading flight of capital has been estimated to be to the tune of Tk.
64.8 crore. However, this was not the case for a third company which was not directly listed and
indicative price of this share did not experience much volatility. However, the SEC was unable to take
appropriate measures to address this type of abnormal market behaviour and those who were involved
with such abusive practices were not met with sanctions.88
Recently SEC has revised several aspects of the book building system such as putting a bar against
mentioning the expected future earnings in company’s prospectus, making it mandatory for bidders to
participate in the road show organised by the issuer company and shortening the period of processing the
book‐building for new companies. Implications of the revised system of book building will need to be
closely studied and appropriate lessons will need to be drawn.
Figure 15: Daily Share Price of Company X Following Book Building System
Source: Based on Dhaka Stock Exchange (DSE).
Anomalies in the Financial
System
Certain anomalous provisions of
the financial system of the country
concerning the capital market are
adversely affecting the
development of the capital
market. First, although
commercial banks are not allowed
to invest more than 10 per cent of
their deposits in the stock
market89, a total of 12
commercial banks have been
identified by the Bangladesh Bank
which have violated this rule.
Though the central bank has
instructed these banks to adjust
their investment within the
stipulated time of November
2010, things have not changed
much. Second, funds disbursed to
industrial enterprises in the form
of term loan, working capital and
over‐draft against workers’ salary
is reported to have been diverted
to the capital market. The central
bank has instructed commercial
banks to adjust such loan
portfolios (particularly loans worth
more than Tk. 10 million) by 15
February 2011. Third,
unsubstantiated gossips and
rumour with regard to
enforcement of the Insurance Act
2010 and the Insurance
Regulatory Authority Act 2010
have fuelled prices of shares of
some of the listed insurance
companies. Fourth, while
merchant banks are supposed to
be issue‐managers, at least for one
The Bangladesh Accountant January - March 2011 27