BSEC warns stock exchanges of short-selling

The regulator has detected notable number of short-selling by the newly set-up Instant Watch Surveillance System software

The securities regulator BSEC has warned the country’s two stock exchanges of short-selling and said the rate of breaching the securities rules increased in the recent times.

Short selling is the selling of a stock that the seller doesn’t own. More specifically, a short sale is the sale of a security that isn’t owned by the seller, but that is promised to be delivered.

“The commission has asked the stock exchanges to take necessary steps to refrain from short-selling executed by its member brokers,” said Bangladesh Securities and Exchange Commission in a statement on Tuesday.

The regulator has detected notable number of short-selling by the newly set-up Instant Watch Surveillance System software.

On charge of short-selling, the commission fined Hilly Securities, a member of the Chittagong Stock Exchange, Tk100,000. The brokerage firm sold 5,000 shares of First Securities Islami Bank Ltd on May 15.

Kabir Securities, another member of CSE, was also fined Tk500,000 for violating margin loan rules.

It provided loan for purchasing Z-category or junk shares to its clients in October and for transferring fund from consolidated customers’ account to its FDR account. Credit issued against Z-category shares is a violation of margin loan rules.

The BSEC has also directed the Dhaka Stock Exchange not to allot shares to its member Don Securities Ltd after Demutualisation until settlement of allegation of swindling money of its clients.

Since August, 2010, the commission suspended trading activities of the brokerage firm in response to the complaints of its clients who brought allegation of not returning money and share for long.