Stock broker faces BSEC heat for market manipulation
Commerce Bank Securities and Investment, a stock broker, looks set to face punishment from the stock market regulator for its alleged role in manipulation of seven companies' share prices.
The companies are: Monno Jute Stafflers, Monno Ceramic, Legacy Footwear, BD Autocars, Queen South Textile, Alif Industries and Eastern Lubricants.
The stock broker enabled the manipulative transactions of its clients and created artificial demand, according to the report of the enquiry committee of Bangladesh Securities and Exchange Commission (BSEC).
The panel was formed on June 21 after abnormal price hikes of some shares.
Commerce Bank Securities and Investment also did not notify the suspicious transactions to the commission.
It also extended credit facilities to clients to buy shares of Queen South Textile and Alif Industries beyond the permissible limit in violation of the margin rules.
On the basis of their findings, top officials of the brokerage house were asked to come to a hearing on Monday.
A top official of the BSEC said they were not satisfied after hearing Commerce Bank's side of the story. “So the commission may take action against them,” he said upon condition of anonymity.
Commerce Bank Securities had a dominant and influential role in the trading of Monno Jute Stafflers shares that caused the price to rise abnormally, according to the enquiry report.
On July 8, Monno Jute Satfflers, a company with not the most solid of fundamentals, became the most valued stock on the Dhaka Stock Exchange, overtaking British American Tobacco Bangladesh, a solid stock by all accounts.
In nine months, Monno Jute's share price soared 6.3 times to Tk 5,430 at present. In contrast, BATB's share was traded at Tk 3,315 yesterday.
On May 16, the brokerage house bought 50.82 percent of the Monno Jute Stafflers stocks on behalf of its clients and continued to buy 25-30 percent of the stock for the next several days, said the report. In the same way, a huge buy pressure of Monno Ceramics, Legacy Footwear, BD Autocars, Queen South Textile, Alif Industries and Eastern Lubricants came from the stock broker.
“Without the association of Commerce Bank Securities, these large volumes of trades were not possible by the clients,” the report said.
Legacy Footwear rose 3.5 times in five months to Tk 262; it traded at Tk 218 yesterday. Bangladesh Autocars soared 3.2 times in three months to Tk 457. Yesterday, Bangladesh Autocars traded at Tk 263.
The abnormal price hike of the three stocks prompted the capital market regulator to suspend their trading for 30 days starting from August 19.
Monno Ceramic's share price increased 3.2 times in a space of six months to Tk 377 yesterday, while Queen South Textile rose 1.4 times in four months to Tk 66; yesterday it traded at Tk 43.
Eastern Lubricants went up 78.79 percent in five months to Tk 1,686; it traded at Tk 1,363 yesterday.
Alif Industries was volatile during the year; it traded at Tk 72.9 yesterday.
MA Motalib Chowdhury, chief executive of Commerce Bank Securities, said the customers purchased the shares through their beneficiary owner's account abiding by rules and regulations.
“We did not buy any of these shares in our dealer account, so we are not connected with manipulation.”
He also denied providing excessive loans to the margin loan.
“It is an old account, dating back to 2010. It has accumulated interest charges over time, so it seems the amount of loan is big,” he added.
