1. Prohibition of Insider trading regulations
Price Sensitive Information: It means any such information which, if published may
influence market price of the concerned security and includes the following information:
i. Report in respect of financial condition of the company or any basic information in
respect thereof;
ii. Information relating to dividend
iii. decision of giving right, bonus shares to the shareholders
iv. decision of buying or selling any immoveable asset
v. decision of BMRE, New unit of the Company
vi. Basic change of activities of the company
vii. Any others as determined by the Commission
Insider trading:
It means buying or selling or transferring by any other means of any securities by any insider
on the basis of price sensitive information.
Prohibition of insider trading:
No person shall either himself or through any other person deal in any insider trading nor
shall he give any personal advice or help in respect of such trading.
Power and function of the commission, Section-8, SEC Act, 1993.
It shall be the responsibility and duty of the commission to ensure the proper issuance of
Securities, to protect the interest of the investors in securities and to promote the
development and to regulate the Capital and Securities market in Bangladesh.
In particular and without prejudice to the provision of Section 8(1), the duties and functions
of the Commission may include the following:
(a) Regulating the business of the Stock Exchanges or any other market of Securities;
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2. (b) Registering and regulating the working of stock brokers, sub-brokers, share transfer
agents, bankers and manager to the issue, trust deeds, registrars to an issue,
underwriters, portfolio managers, investment advisers and such other intermediaries
who may be associated with securities market in any manner whatsoever;
(c) Registering regulating and monitoring the working of any form of collective
investment scheme including all forms of mutual funds;
(d) Promoting, monitoring and regulating all authorized self-regulatory organizations in
the securities market;
(e) Prohibiting fraudulent and unfair trade practices relating to securities or in any
securities market;
(f) Promoting investors education and training of all intermediaries of securities market;
(g) Prohibiting insiders’ trading in Securities;
(h) Regulating substantial acquisition of share or stock and take over of Companies;
(i) Calling for information from, undertaking investigation and inspection, conducting
inquiries and audit of any issuer or dealer of securities, the Stock Exchange and
intermediaries and any self-regulatory organization in the Securities market;
(j) Compiling, analyzing and publishing indices on the financial performance of any
issuer of Securities;
(k) Levying fees or other charges for carrying out the purpose of this section;
(l) Conducting research and publishing information for the above purpose; and
(m) Performing such other functions and duties as may be prescribed for fulfilling the
objectives of this Act.
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3. Appeal, Section-21, SEC Act 1993
1. If any one is aggrieved with any order of any members or officers of the Securities
and Exchange Commission (SEC) on any matter, may appeal to Securities and
Exchange Commission on any matter under this Act within the stipulated time as
framed under the rules. The decision of the commission on the said appeal shall be
final;
2. No appeal shall be accepted after the stipulated time but the commission may accept
any appeal where there were adequate reasons for such delay;
3. The appeal, in question, shall be made in prescribed form with prescribed fees along
with the copy of the order against which appeal is to be made;
4. The decision of the appeal shall be final according to the laid down rules. No decision
of the appeal shall be final without giving a reasonable opportunity of hearing;
5. The commission at its own discretion or with the application from any one may
reconsider any appeal. The decision of the commission shall be final.
Prospectus
A prospectus is an invitation to the public to purchase shares or debenture of a company. In
other words, a prospectus may be defined as any document that includes any notice,
circular, advertisement or other document inviting offers from the public for the subscription
or purchase of any share or debentures of a body corporate. Prospectus has the following
characteristics:
1. It is a document described or issued as a prospectus;
2. It includes any notice, circular, advertisement to the public for sale of
securities;
3. It is an invitation to the public;
4. The public is invited to subscribe the shares or debentures of a
Company.
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4. Registration of Prospectus
Before publication of a prospectus inviting people to subscribe shares or debentures of a
Company, a copy of the prospectus must be delivered to the Registrar for registration on or
before the date of publication. It should be signed by the Directors or proposed Directors of
the Company or by their agent. On the face of the prospectus delivered to the Registrar for
registration, it should be stated that a copy has been delivered for registration; and must
contain a list of statements included in the prospectus. The registrar shall not register a
prospectus unless the prospectus contains all the required elements as per Companies Act
1994, Public Issue Rules 2006, and other SEC regulations and the prospectus is
accompanied by the consent in writing of the person if any, named therein as the auditor,
legal adviser, attorney, solicitor, banker or broker of the Company to act in that capacity. No
prospectus shall be issued more than ninety days after the date on which a copy thereof is
delivered for registration. If a prospectus is issued without delivering a copy thereof to the
Registrar, the Company and every person from those who have knowing been a party to the
issue of the prospectus shall be punishable with the fine which may extend to five thousand
taka (Section 138)
Delisting and suspension “Section – 31
A listed Company may be de-listed or suspended for any of the following reasons:
(a) If its securities are quoted below 50% of face value for a continuous period of
3 calendar years.
(b) Failed to declare dividend or Bonus:
For 5 years from last dividend.
For 5 years from commencement of Business
For 5 years from the date of commercial operation.
(c) Failed to hold Annual General Meeting for a continuous period of 3 years.
(d) Gone into liquidation.
(e) Failed to pay listing fees or Penalty for two years.
(f) Failed to comply any provision of the regulations.
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5. Securities not traded for 180 days
Where no trading took place in the Exchange of the securities of a listed Company for a
continuous period of 180 days, the Exchange, if it is satisfied that the prices quoted are not
in accordance with the market realities, the Exchange may declare it as not traded or as an
inactive stock, until such time as a subsequent trade takes place and a price is ascertained.
Restriction on dealings in securities
The restrictions in dealing in securities have been imposed by the SEC ordinance 1969
under various sections which are as follows:
As per section 2A no company in shall make an issue of capital in Bangladesh or
make in Bangladesh any public offer of securities for sale without consent of SEC.
As per section 2b consent of the commission must be taken before issuance of any
prospectus
As per section 2c no person shall accept or give any consideration for any securities
for which consent of the commission has been accorded to such issue of capital
As per section 3 no stock exchange shall operate or carry on its functions and no
persons shall use the stock exchange unless it is registered under the SEC
ordinance.
Listing of securities
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6. Application for listing shall be made by the applicant company or on behalf of security in the
prescribed form and will be accompanied by the fees, specified in the regulations. Following
documents, papers are to be submitted to the Exchange for listing of any securities:
i) Application for listing in prescribed form as per “Form-I”
ii) Memorandum and articles of association
iii) A copy of certificate of incorporation
iv) A copy of certificate of commencement of business
v) A copy of feasibility report
vi) Registration of the Board of Investment
vii) Copies of material contract with suppliers, Foreigners, financial institutions
viii) Copies of L/cs for plant and machinery
ix) Draft prospectus
x) Auditors’ certificate for the amount subscribed by the promoters
Information to be included in the Directors report
As per clause 37(4) of DSE listing regulations following information are to be contained in
the Director’s report in addition to the requirement of companies Act 1994:
(i) Name of the persons who were directors in the financial year
(ii) The principal activities of the company
(iii) Significant changes in the company
(iv) Information relating to issuance of share, If any share is issued during the
financial year
(v) A statement of each director whether or not he had an interest in any other
body corporate within the group
(vi) Any contribution made to the government exceeding Tk. 50,000.00
Who are insiders? All persons who came into possession of material inside information
before its public release are considered insiders for the purpose of the exchanges disclosure
policies. Such persons include controlling shareholders, Directors, officers, attorneys,
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7. auditors, advisors, consultant, contractors, bankers etc. The husbands, wives and immediate
family members of the above insiders are also considered as insiders.
Insider information: Insider information is that which has not been publicly released and
which is intended for use solely for a corporate purpose and not for any personal use and
which the company withholds.
Insider trading: Insider trading refers not only to the purchase or sale of company
securities but also to the purchase or sale of options with respect to such securities. Such
trading in deemed to be done by an insider whenever he has any beneficial interest, directly
or indirectly in such securities or options regardless of whether they are actually held in his
name.
Prevention of insider trading:
• Issuing notice to the concerned persons;
• Penal provision in the Company’s rules, and
• Awareness of related SEC laws, rules.
Requirements of Cash flows in SEC rules
As per SEC rules 1987 the cash flows statement shall be so made out as to disclose clearly
the cash flows of the company from its operation, investing and financing activities. The
major classes of cash receipts and cash payments should be disclosed using Direct
Method. Interest payments, long term loan repayments /receipts, dividend receipts and
payments, etc. are to be disclosed clearly. Net Operating Cash flows per share is to be
disclosed.
Do all the companies issue a prospectus?
All the companies do not issue a prospectus. Only the Public Limited Companies having
permission from the Securities and Exchange Commission may issue a prospectus. A public
limited company which does not issue a prospectus, it shall issue a statement in lieu of
prospectus.
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8. As per Section-141 a Public Limited Company having a share capital and not issuing
prospectus must at least 31 days before the first allotment of shares or debentures, file with
the Registrar for registration a statement in lieu of prospectus. The statement must be in the
form prescribed in schedule – IV of the Companies Act-1994.
In case of untrue and misleading information furnished in the prospectus its promoters and
directors will be held liable. The shareholders may claim the value of shares allotted. The
Shareholders may claim demurrage for any losses incurred for such misstatement furnished
in the prospectus.
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9. Salient features of Initial public offering rules
IPO rues are also referred to as the Public Issue Rules 2006. Some important sections of
which are described below:
Rule-3: Application for consent to an issue of capital:
For obtaining consent to an issue of capital, an issuer shall apply to the SEC with
some documents such as three copies of prospectus duly completed and signed.
Rule-4: Publication of prospectus and opening of subscription:
The Prospectus shall be published in two national daily newspapers within 10 days
from the date of receipts of such consent from SEC.
Rules- 7: Format and contents of prospectus:
A) All material information and disclosures are to be included to enable investors to
make an informed assessment of the company and its position.
Information to be included in the prospectus
Cover page: Following information shall give on the from cover page:
a) Name of the company;
b) The amount and type securities being issued;
c) The offering price of securities;
d) The amount of commission being paid;
e) The name and address of underwriters;
f) The date of prospectus; and
g) Consent clause in bold type
1. Table of Contents (in side cover page): Information relating to the following matters
are to be given in details with a comprehensive manner:
i. Risk factors: Such as industry risk, Currency risk, market risk etc.
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10. 2. Use of proceeds
3. Description of business: Date from which the company was organized, date of
commencement of operation, principal product of the company, Distribution of
products, source of Gas, Electricity and water etc.
4. Description of property:
i. Plant of operation and discussion of financial condition
ii. Director and officers
iii. involvement of officers and directors in certain legal proceedings
iv. Certain relationship and related transactions
v. Executive compositions
vi. Option granted to officers, directors and employees
vii. Transaction with promoters
viii. Ownership of the companies securities
ix. Determination of offering price
x. Plan of distribution
xi. Market for securities being offered
xii. Description of such Securities
xiii. Financial statements requirements etc.: a summary of earnings, Profit
and loss account, cash flows statements etc. for last five years,
Rule-10: refund of over subscription
Rule: 11: Subscription and refund by or to NRB
Rule-12: Availability of securities: 10% shall be kept reserve for NRB, 10% for
Mutual Fund and 80% for general public
Rule-14: Issue manager
Rule-15: Underwriter
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