The Securities and Exchange Commission will have no bar now to exercising a special power of imposing conditions on listed companies.
The High Court yesterday upheld the power that the regulator has been exercising since 1997.
An HC bench of justice Hasan Foez Siddique and justice Md Jahangir Hossain delivered the verdict after rejecting five petitions filed by 24 sponsors and directors of five listed firms challenging the legality of Section 2CC of SEC Ordinance, 1969.
“All the rules are discharged,” the bench ordered in the verdict, after hearing arguments of both sides in a five-day hearing.
Attorney General Mahbubey Alam told journalists that the Section 2CC is legal and not unconstitutional.
“The SEC can impose conditions on listed companies for the interest of the market as well as the investors,” he said, adding that the Section 2CC will be helpful in ensuring accountability and transparency in the stockmarket.
Dr Kamal Hossain, Mahmudul Islam, Rokanuddin Mahmud, Akter Imam and Ramzan Ali Sikder appeared for the petitioners, while Attorney General Mahbubey Alam and Additional Attorney General Murad Reza stood for the government.
Amir-Ul Islam, Sheikh Fazle Noor Taposh and AF Hasan Ariff represented the defendants -- the SEC, Dhaka Stock Exchange and Chittagong Stock Exchange.
Using the Section 2CC, the SEC in a circular on November 22 last year made it compulsory for the sponsors, directors and promoters of listed firms to acquire at least 2 percent stake individually and 30 percent stake jointly in their firms for all time.
The 24 directors of NCC Bank, Mercantile Bank, Southeast Bank, National Life Insurance and Prime Finance filed five pleas separately on May 22 challenging the legality of the Section 2CC.
The court on June 4 issued a rule asking the stockmarket regulator to explain within one week why the Section 2CC would not be declared unconstitutional.
The five writ petitions were filed after the HC on May 21 upheld the SEC directive on the minimum shareholding. The court delivered the verdict after rejecting petitions filed by some directors and aspirant directors of three listed firms. The petitioners had challenged the legality of the SEC circular on the minimum shareholding.
Helal Uddin Nizami, a senior member of the SEC, said the regulator has won the legal battle. “The commission always exercises the 2CC for the greater interest of the market,” he added.
Mohammad A Hafiz, president of Bangladesh Merchant Bankers' Association, said the verdict on the Section 2CC will help investors get back their confidence in the market.
Ahmed Rashid Lali, senior vice president of the DSE, said the market will react positively following the verdict.
The recent downtrend in the market due mainly to the legal battle between the sponsor directors and the SEC will come to an end, he added.