In an unprecedented move, the Bangladesh Securities and Exchange Commission (BSEC) verbally instructed all independent directors of the Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) to resign, according to BSEC sources.
Both exchanges were demutualised in 2013 to separate ownership from management, with the regulator appointing independent directors to their boards.
Since the implementation of the demutualisation scheme, this marks the first instance of all independent directors being compelled to resign following the political regime change when the Sheikh Hasina-led government stepped down on 5 August amid mass protests.
No formal order was issued, but on 20 August the independent directors were verbally instructed to resign through the managing directors of the exchanges, according to a BSEC official.
Speaking anonymously to the news media, the official said that the commission intends to appoint all new independent directors now as the Nomination and Remuneration Committee (NRC) at the bourses is no longer functional.
Typically, independent directors were appointed based on recommendations from the NRC, which provided a shortlist of interested applicants.
Following the regulator’s verbal instruction, all independent directors of the DSE resigned on 21 August. However, as of now, the independent directors of the CSE have not yet resigned, according to exchange officials.
A CSE official confirmed that some independent directors have already resigned, with others expected to follow suit by today.
Meanwhile, the BSEC yesterday formed two probe committees to review the operations of both the DSE and CSE, with plans for significant reforms. Both committees have been tasked with submitting its report within 20 working days.
Stock exchanges become defunct!
To ensure neutrality, enhance corporate governance, and improve business efficiency, independent directors were appointed to the boards of the stock exchanges.
Each board comprises 13 members: seven independent directors, five shareholder directors (including a seat for strategic investors), and the managing directors as ex-officio members.
According to the Board and Administration Regulations of 2013, independent directors must constitute the majority on all board committees, including holding the chairmanship, thus securing a strong role in the committees’ decisions and functions.
The regulations stipulate that a quorum requires one-third of the board of directors, with the majority of those present being independent directors.
Since all directors were compelled to resign, the boards of the bourses are now defunct. The boards will not meet the quorum requirements until new independent directors are appointed.
Sattique Ahmed Shah, acting managing director of the DSE, told the news media, “With all the independent directors resigning, only the shareholder directors remain on the board, including the representative of the strategic investor who holds a 25% stake in the DSE.”
When asked about the next steps, he said, “With all the independent directors having resigned and no NRC in place, we are awaiting instructions from the regulator.”
“The bourse will follow the regulator’s directives on these matters,” he added.
Probe bodies formed to inspect bourses
The stock market regulator has formed two separate probe committees to investigate the operations of the DSE and CSE as part of a major reform effort.
These committees will assess why the exchanges have not functioned as required under the rules. Following the receipt of the inspection reports, the BSEC will take appropriate actions based on the findings.
The DSE probe committee is led by BSEC director Md Abul Kalam and includes additional director Mollah Md Miraz Us Sunnah, deputy director Md Bony Yeamin Khan, and assistant director Muhammad Sadequr Rahman Bhuiyan.
For the CSE, the inspection committee is led by BSEC director Mohammed Fakhrul Islam Mazumder. The committee also includes additional director Mohammed Siddiqur Rahman, deputy director Md Rafiqunnabi, and assistant director Md Sazzad Hossain.
The regulator has instructed that the stock exchanges must fully cooperate with the committee’s audit activities. This involves providing requested information, granting access to the premises without delay, and maintaining all security protocols.
The committee is expected to submit its report to the Commission within 20 working days from the date of the order.
Who were the Independent Directors at DSE and CSE?
At the DSE, the independent directors were Hafiz Md Hasan Babu, Abdullah Al Mahmud, Md Afzal Hossain, Rubaba Dowla, Md Shaheedul Islam, Kawser Ahmed, and Brigadier General M Imran Hamid.
The independent directors at the CSE were Abdul Halim Chowdhury, Kaashif Reza Choudhury, Monjurul Ahsan Bulbul, Ishter Mahal, Mohammad Naquib Uddin Khan, and Rezwanul Huque Khan.