Amendment to the Securities and Exchange Commission (Merchant Banker and Portfolio Manager) Rules 1996

Securities and Exchange Commission
Life Insurance Tower (16th, 17th and 21st Floor) 10, Dilkusha B/A, Dhaka-1000.
Notification
Date: 16 June, 2008
No./SEC/CMRRCD/2006-159/Admin-01/31: In exercise of the powers conferred by Section 24 of the Securities and Exchange Commission Act, 1993 (Act No. 15 of 1993), and in accordance with the rules made under sub-section (1) of the said section, after previous publication, the Securities and Exchange Commission (Merchant Banker and Portfolio Manager) Rules, 1996, are hereby further amended as follows:-

In the said Rules,-

1. In Rule 2, sub-rule (1), clause (j), the words "partnership firm or any other class of institution;" shall be substituted by the words "any other institution approved by the Commission;".

2. After Rule 3, the following new Rule 3A shall be added, namely:-
   "3A. Ineligibility for Registration Approval.- (1) An application for registration approval by any merchant banker shall not be eligible if:- (a) it is not a company, a statutory body or any other institution approved by the Commission:
   Provided that, merchant bankers who were previously registered as institutions other than companies or statutory bodies shall be required to convert into companies within 6 (six) months from the date of publication of this amending gazette notification;

(b) its paid-up capital is less than 10 (ten) crore Taka and its net current assets are less than 50 (fifty) percent of the paid-up capital:
Provided that,
(i) if any applicant intends to engage in any issue management other than underwriting, it shall have a minimum paid-up capital of 1 (one) crore Taka, and in the case of a certified issue manager, the paid-up capital shall be increased to 1 (one) crore Taka within 1 (one) year from the date of publication of this amending gazette notification;

(ii) if any applicant intends to engage in issue underwriting, it shall have a minimum paid-up capital of 5 (five) crore Taka, and in the case of a certified underwriter, a minimum of 3 (three) crore Taka shall be raised within 1 (one) year from the date of publication of this amending gazette notification, and the remaining amount shall be raised within the subsequent 1 (one) year, increasing the paid-up capital to 5 (five) crore Taka;

(iii) if any applicant intends to engage in portfolio management, issue management and underwriting, it shall have a minimum paid-up capital of 10 (ten) crore Taka, and in the case of a certified issue manager, underwriter and portfolio manager, a minimum of 6 (six) crore Taka shall be raised within 1 (one) year from the date of publication of this amending gazette notification, and the remaining amount shall be raised within the subsequent 1 (one) year, increasing the paid-up capital to 10 (ten) crore Taka:
Further provided that, an underwriter and merchant banker shall never be allowed to underwrite more than five times its capital, i.e., paid-up capital and free reserves (excluding revaluation reserve); and a merchant banker shall never be allowed to collectively engage in issue underwriting and portfolio fund management more than five times its capital, i.e., paid-up capital and free reserves (excluding revaluation reserve).

(c) the application does not merit consideration in the opinion of the Commission for the interest of the capital market or investors;

(2) The Commission may, in the public interest, relax any of the provisions of sub-rule (1) for any merchant banker."

3. In Rule 5, sub-rule (1), clause (d), the word "partner", wherever it occurs, shall be substituted by the word "director".

4. In Rule 7, sub-rule (2), the following sub-rule (2) shall be substituted, namely:-
   "(2) Within 1 (one) month of obtaining the decision of the Commission under sub-rule (1), the applicant shall deposit 1,00,000 (one lakh) Taka as certification fee and 50,000 (fifty thousand) Taka as the first annual fee of the certificate to the Commission by Pay-Order or Bank Draft."

5. In Rule 10, sub-rule (1), the following sub-rule (1) shall be substituted, namely:-
   "(1) The annual fee for the registration certificate of each certified merchant banker under these Rules shall be 50,000 (fifty thousand) Taka, which shall be deposited to the Commission by Pay-Order or Bank Draft."

6. After Rule 16, the following new Rule 16A shall be added, namely:-
   "16A. Ineligibility for Registration Approval.- (1) An application for registration approval by any portfolio manager shall not be eligible if:- (a) it is not a company, a statutory body or any other institution approved by the Commission:
   Provided that, portfolio managers who were previously registered as institutions other than companies or statutory bodies shall be required to convert into companies within 6 (six) months from the date of publication of this amending gazette notification;

(b) its paid-up capital is less than 5 (five) crore Taka and its net current assets are less than 50 (fifty) percent of the paid-up capital, and in the case of a certified portfolio manager, a minimum of 3 (three) crore Taka shall be raised within 1 (one) year from the date of publication of this amending gazette notification, and the remaining amount shall be raised within the subsequent 1 (one) year, increasing the paid-up capital to 5 (five) crore Taka:
Provided that, a portfolio manager shall never be allowed to manage portfolio funds more than five times its capital, i.e., paid-up capital and free reserves (excluding revaluation reserve);

(c) the application does not merit consideration in the opinion of the Commission for the interest of the capital market or investors.

(2) The Commission may, in the public interest, relax any of the provisions of sub-rule (1) for any portfolio manager."

7. In Rule 18, clause (d), the word "partner", wherever it occurs, shall be substituted by the word "director".

8. In Rule 20, sub-rule (2), the following sub-rule (2) shall be substituted, namely:-
   "(2) Within one month of obtaining the decision of the Commission under sub-rule (1), the applicant shall deposit 1,00,000 (one lakh) Taka as certification fee and 50,000 (fifty thousand) Taka as the first annual fee of the certificate to the Commission by Pay-Order or Bank Draft."

9. In Rule 24, sub-rule (1), the following sub-rule (1) shall be substituted, namely:-
   "(1) The annual fee for the registration certificate of each certified portfolio manager under these Rules shall be 50,000 (fifty thousand) Taka, which shall be deposited to the Commission by Pay-Order or Bank Draft."

10. In Rule 30,-
    (a) The following sub-rule (4) shall be substituted for sub-rule (4), namely:- "(4) A portfolio manager shall generally purchase and sell securities separately for each client, and in cases where securities are purchased or sold collectively, it shall distribute them proportionately at the average price:
    Provided that, in the case of securities held in dematerialized form, the portfolio manager shall maintain separate Beneficiary Owner Accounts (BO Accounts) for each client and purchase and sell securities in respect of such accounts, and in cases where securities are purchased and sold in a collective account (Collective BO Account), it shall transfer securities to the respective Beneficiary Owner Accounts (BO Accounts) proportionately at the average price."

(b) The following sub-rule (6) shall be substituted for sub-rule (6), namely:- "(6) A portfolio manager shall keep the funds and securities of each client separate and distinct from its own funds and securities, and the portfolio manager shall act as the custodian of the client's funds and securities:
Provided that, if it is mentioned in this agreement that the portfolio manager may keep the client's securities in its own account, the portfolio manager may take such arrangement after informing the client accordingly:
Further provided that, in the case of securities held in dematerialized form, the portfolio manager shall maintain separate Beneficiary Owner Accounts (BO Accounts) for each client, and in cases where separate Beneficiary Owner Accounts do not exist, such accounts shall be opened within 3 (three) months from the date of publication of this amending gazette notification, otherwise, the portfolio manager shall provide the securities of the concerned client held in the collective account to the owner client before selling them:
Further provided that, in cases where a portfolio manager deals in dematerialized (physical) securities in a collective account (Collective BO Account) on behalf of a client, the transacted securities shall be transferred to the respective Beneficiary Owner Account (BO Account) within the interval of two simultaneous settlement times of the Stock Exchange or within 7 (seven) trading days, whichever is earlier."

11. In Form 'C',-
    (1) In clause (d) of paragraph 4, the words "Limited Company Private/Public, Unlimited Company, Partnership Firm, Sole Proprietorship Firm and others." shall be substituted by the word "Applicant", and the words "Partner", "Owner", "Firm" in clauses (e) and (f) shall be deleted.
    (2) Notes 1 and 2 of paragraph 18 shall be deleted.
    (3) In the declaration section under paragraph 26, the words ", two partners or a sole proprietor whose or whose" shall be deleted.

12. In Form 'D',-
    (1) In clause (d) of paragraph 4, the words "Limited Company Private/Public, Unlimited Company, Partnership Firm, Sole Proprietorship Institution and others." shall be substituted by the word "Applicant".
    (2) Notes 1 and 2 of paragraph 7 shall be deleted.
    (3) In the declaration section under paragraph 19, the words ", two partners or a sole proprietor whose or whose" shall be deleted.

By Order of the Securities and Exchange Commission Faruk Ahmed Siddiqui Chairman.