Inset, Ibrahim Khaled

Retail investors lost at least Tk 20,000 crore to some dishonest traders, who were in a deep collusion with stockmarket regulators, a committee said in a probe report submitted to the finance minister yesterday.
Direct listing alone accounted for Tk 5,000 crore going into private pockets, and Tk 15 crore was siphoned out of the country, said the government probe committee on the recent share market crash.
The four-member committee headed by Khondkar Ibrahim Khaled, former deputy governor of Bangladesh Bank, submitted its 320-page report to Finance Minister AMA Muhith.
The probe body made a series of recommendations and cited 15 case studies as proof of extensive market manipulation.
“All institutions involved in the stockmarket were responsible for the debacle,” Khaled told reporters after submitting the report.
Later in the day, Muhith held a press conference and promised to bring the people responsible for the stock debacle to justice.
The committee found manipulation in both primary and secondary markets, to a greater extent than in the 1996 scam that was limited to the secondary market alone.
“This time around, the primary market saw more irregularities than in the secondary market,” said a probe committee member.
Crooked traders took Tk 20,000 crore out of the market through direct listing, private placement, preferential shares, mutual fund and book-building method, he added.
The report lists 100 people, who received shares in private placement. Many influential figures, politicians and businessmen are among them.
But the probe could not identify those who received placement shares by fake names. The committee urged the government to form a separate probe body to find them out.
Khaled held responsible the Securities and Exchange Commission (SEC), Dhaka Stock Exchange, Investment Corporation of Bangladesh (ICB), issue managers, issuers, valuers and auditors for the collusion that made the market volatile.
“In the probe report, we mentioned that some government officials influenced the commission and a few culprits sold placement shares verbally to other stakeholders without informing the SEC."
“The SEC, the ICB, military officers, government high officials and bourses are all connected with placement business,” he said.
The committee could not ascertain the total amount that was taken out of the stockmarket before its collapse. But the probe body found out that some money went into private pockets.
At least Tk 4,000 crore to Tk 5,000 crore might have gone to private pockets through direct listing.
On siphoning money out of the country, Khaled said GEM Global Yield Fund Ltd, in collusion with local company Thai Aluminum, sent around Tk 15 crore abroad.
Referring to market manipulation, he said the same 19 people used two different addresses to purchase shares of Tk 19 crore through private placement.
There were certainly some irregularities, he said.
For instance, Khaled said, a group of 10 people made a verbal agreement with another group of ten. They sold and purchased shares among themselves to push up their prices just to sell the whole chunk at an exorbitant price later.
“They did this to lure retail investors into buying their shares at high prices. Not one or two individuals, many groups had done that. They are responsible for making the market volatile,” he said.
The committee found grave manipulation through omnibus accounts. The probe found involvement of a private television owner, his closest friend and his wife and a number of influential businessmen close to the government in such accounts.
Due to lack of adequate time, the committee could only look into four omnibus accounts, which appeared to be enough to show their active involvement.
“The probe found strange things in these accounts,” the committee member said, adding: “The government should look into other accounts, as major manipulation has taken places through this type of account.”
Khaled said he doesn't think politics had anything to do with the debacle.
“Some businessmen, who have close ties with the people in power, might have taken undue advantage of their connections. Some of them either support Awami League or BNP, but when it comes to making money, they are above politics.”
The report said issuer companies, issue managers, asset valuation agencies, audit firms, dealers, brokerage firms and many others are involved in myriad illegal activities that include direct listing in IPO issuance and pre-IPO activities, revaluation of company assets, fixing of high indicative value, manipulation of book-building method and non-transparency in placement.
Dealers, brokers and many others are responsible for irregularities in circular and block trading, and unusual transactions.
“As a regulator, it is the responsibility of the SEC to examine these kinds of wrongdoings, non-transparency and immoral activities. There is no scope for such unlawful activities without approval from the regulator. Therefore, the SEC is to blame for the stockmarket volatility,” the report continued.
Merchant bankers are opening investors' accounts on their own. They are also operating only one beneficiary account (BO) account for every 5,000 to 10,000 accounts, showing sheer negligence to the laws.
“As a result, investors stay behind the BO account and beyond the public eye. Their accounts with merchant banks have become the den of corruption and irregularities. BO accounts do not contain the names of people whose shares are being traded,” read the report.
The probe found that a number of SEC and ICB high officials have been engaged in share trading in the name of family members or relatives. Those officials have been named in the report, finance ministry sources said.
The probe body has evidence that SEC Executive Officer Anwarul Kabir Bhuiyan has traded shares in his wife's name while ICB DGM Kofil Uddin Ahmad Chowdhury in his wife and brother-in-law's names.
Many other names will come out if an extensive investigation is conducted, the report said.
The probe committee also found involvement of many policymakers, businessmen and stock-exchange officials in manipulating the market.
It gathered that a syndicate of around 30 people had a hand in the unusual ups and downs of the market.
Some companies overvalued their assets to influence the market. They include Libra Infusions (overvalued by 3472 percent), Sonali Ansh Industries (626 percent), Rahim Textile (518 percent), BD Thai Aluminium (298 percent), Orion Infusion (413 percent), Ocean Containers Ltd (296 percent) and Shinepukur Ceramic (120 percent).