Bangladesh Securities and Exchange Commission (Prohibition of Insider Trading) Rules, 2022

Registered No. D.A-1

Bangladesh Gazette
Extraordinary Issue
Published by Authority

Monday, January 30, 2023

[ Advertisements and Notices issued by private persons and corporations ]

Bangladesh Securities and Exchange Commission

Notification

Date: 28 December 2022

No.-BSEC/CMMRCDI/2011-396/52/Admin/140—In exercise of the powers conferred under Section 24(1) of the Bangladesh Securities and Exchange Commission Act, 1993 (Act No. 15 of 1993), the Bangladesh Securities and Exchange Commission, after prior publication, hereby makes the following rules, namely:—

1. Short title.—These rules shall be called the Bangladesh Securities and Exchange Commission (Prohibition of Insider Trading) Rules, 2022.

2. Definitions.—(1) Unless the context otherwise requires, in these rules—

(a) “Ordinance” means Securities and Exchange Ordinance, 1969 (Ordinance No. XVII of 1969);

(b) “Unpublished Price Sensitive Information” means any unpublished information described in Rule 3(1), which, if published, could affect the market price of the relevant listed security or fund unit on any trading board of the stock exchange, or could significantly affect the net asset value of the relevant issuer;

[Explanation: In this context, “significantly” refers to the possibility of affecting the valuation of the current net assets of any issuer by at least 10% (ten percent) or at a rate determined by the Commission from time to time.]

(c) “Act” means the Bangladesh Securities and Exchange Commission Act, 1993 (Act No. 15 of 1993);

(d) “Legal Entity” means any securities issuer institution, trust, fund, or organization, including companies;

(e) “Issuer” means any legal entity issuing listed securities or fund units;

(f) “Material Information” means information that may be considered important in the decision-making process of a reasonable investor;

(g) “Significant Shareholder” means the owner of 10% (ten percent) or more of the shares of a company;

(h) “Immediate Relative” means parents, husband or wife, children, or any such person who is financially dependent on a person or who takes advice from such person regarding securities transactions;

(i) “Fund” means any listed mutual fund, Exchange Traded Fund (ETF), Real Estate Investment Trust (REITs), Alternative Investment Fund, or any joint investment scheme;

(j) “Chief Executive” means the principal executive officer, principal financial officer, company secretary, and the top 5 (five) officers of an issuer;

(k) “Price Sensitive Information” means the information described in Rule 3(1);

(l) “Stock” means any security traded on a stock exchange;

(m) “Insider” means any person mentioned in sub-clauses (a) to (aa) below, or any person who is considered to have direct or indirect access to price-sensitive information before its publication due to their relationship with any person mentioned in sub-clauses (a) to (aa), their position, status, or transaction, namely:—

(a) Directors, sponsors, or entrepreneurs of any listed company, significant shareholders, managing agents, or their interested parties, or their bankers, auditors, asset valuers, credit rating companies, advisors, or their associated officers or employees, or immediate relatives, or any person or institution associated with them;

(b) All contracting parties of any listed fund, or directors, managing agents, bankers, auditors, asset valuers, credit rating companies, advisors of their interested parties, other funds operated under the company managing this fund, or their associated officers or employees, or immediate relatives, or any person or institution associated with them;

Explanation: In this clause, “contracting party” means the sponsor, trustee, fund manager, custodian, proposer, or service-providing institution of a listed fund.

(n) “Legal Entity” means, in the case of a fund, the fund manager or trustee or interested party;

(o) “Issuer” means any legal entity issuing listed securities or fund units;

(p) “Material Information” means information that may be considered important in the decision-making process of a reasonable investor;

(q) “Significant Shareholder” means the owner of 10% (ten percent) or more of the shares of a company;

(r) “Immediate Relative” means parents, husband or wife, children, or any such person who is financially dependent on a person or who takes advice from such person regarding securities transactions;

(s) “Fund” means any listed mutual fund, Exchange Traded Fund (REITs), Real Estate Investment Trust (REITs), Alternative Investment Fund, or any joint investment scheme;

(t) “Chief Executive” means the principal executive officer, principal financial officer, company secretary, and the top 5 (five) officers of an issuer;

(u) “Price Sensitive Information” means the information described in Rule 3(1);

(v) “Stock” means any security traded on a stock exchange;

(w) “Insider” means any person mentioned in sub-clauses (a) to (aa) below, or any person who is considered to have direct or indirect access to price-sensitive information before its publication due to their relationship with any person mentioned in sub-clauses (a) to (aa), their position, status, or transaction, namely:—

(a) Directors, sponsors, or entrepreneurs of any listed company, significant shareholders, managing agents, or their interested parties, or their bankers, auditors, asset valuers, credit rating companies, advisors, or their associated officers or employees, or immediate relatives, or any person or institution associated with them;

(b) All contracting parties of any listed fund, or directors, managing agents, bankers, auditors, asset valuers, credit rating companies, advisors of their interested parties, other funds operated under the company managing this fund, or their associated officers or employees, or immediate relatives, or any person or institution associated with them;

Explanation: In this clause, “contracting party” means the sponsor, trustee, fund manager, custodian, proposer, or service-providing institution of a listed fund.

(x) Any stock broker or stock dealer, market maker, issue manager, portfolio manager, and all intermediaries, or their directors, or their interested parties, or associated officers or employees, or authorized representatives, or immediate relatives, or any person or institution associated with them;

(y) Directors, associated officers, or employees of any self-regulatory organization like the stock exchange or depository company, or their immediate relatives, or any person or institution associated with them, or interested parties of listed companies or funds, or the relevant regulatory authority or legally entitled authority for information access of listed companies or funds;

(z) “Insider Trading” means the purchase, sale, or unauthorized transfer of any security or fund unit by an insider based on unpublished price-sensitive information:

Provided that, the transfer of securities or fund units acquired by virtue of a court order, inheritance from a deceased person, or through confiscation shall not fall under this definition;

(aa) “Associated Officer or Employee” means any associated regulatory authority of a listed company or fund, or the fund manager, custodian, or trustee, and any office-bearer, officer, or employee of a self-regulatory organization like the stock exchange or depository company, who has a legal right or opportunity to know the price-sensitive information described in Rule 3(1);

(ab) “Interested Party” means the following interested persons or interested institutions, namely:—

(a) “Interested Person” means any person or any member of their family who establishes control over or exerts significant influence on any institution, either alone or jointly with others, or who is the chief executive officer or top management of such institution, company, or its holding company;

(b) “Interested Institution” means an institution that is part of another institution or its interested same group, or is related as a holding company, subsidiary company, associate institution, or joint venture, or both are joint ventures of a third institution, or is operated or controlled singly or jointly by the same interested person along with such institution or company;

(ac) Any stock broker or stock dealer, market maker, issue manager, portfolio manager, and all intermediaries, or their directors, or their interested parties, or associated officers or employees, or authorized representatives, or immediate relatives, or any person or institution associated with them;

(ad) Directors, associated officers, or employees of any self-regulatory organization like the stock exchange or depository company, or their immediate relatives, or any person or institution associated with them, or interested parties of listed companies or funds, or the relevant regulatory authority or legally entitled authority for information access of listed companies or funds;

(ae) “Insider Trading” means the purchase, sale, or unauthorized transfer of any security or fund unit by an insider based on unpublished price-sensitive information:

Provided that, the transfer of securities or fund units acquired by virtue of a court order, inheritance from a deceased person, or through confiscation shall not fall under this definition;

(af) “Associated Officer or Employee” means any associated regulatory authority of a listed company or fund, or the fund manager, custodian, or trustee, and any office-bearer, officer, or employee of a self-regulatory organization like the stock exchange or depository company, who has a legal right or opportunity to know the price-sensitive information described in Rule 3(1);

(ag) “Interested Party” means the following interested persons or interested institutions, namely:—

(a) “Interested Person” means any person or any member of their family who establishes control over or exerts significant influence on any institution, either alone or jointly with others, or who is the chief executive officer or top management of such institution, company, or its holding company;

(b) “Interested Institution” means an institution that is part of another institution or its interested same group, or is related as a holding company, subsidiary company, associate institution, or joint venture, or both are joint ventures of a third institution, or is operated or controlled singly or jointly by the same interested person along with such institution or company;

(2) The words or expressions used in these rules for which definitions are not provided shall be used in the same sense as they are used in the Securities and Exchange Ordinance, 1969 (Ordinance No. XVII of 1969), the Bank Company Act, 1991 (Act No. 14 of 1991), the Bangladesh Securities and Exchange Commission Act, 1993 (Act No. 15 of 1993), the Financial Institution Act, 1993 (Act No. 27 of 1993), the Companies Act, 1994 (Act No. 18 of 1994), the Depository Act, 1999 (Act No. 6 of 1999), the Exchanges Demutualization Act, 2013 (Act No. 15 of 2013), and any rules or regulations made thereunder.

3. Price Sensitive Information, Material Information, Insider Information, and its Disclosure, etc.—(1) A listed company or fund, or the issuer of securities, or the manager or management authority or trustee of a fund, shall consider the following information, among others, as price-sensitive information:

(a) Reports on financial position, results of financial position, or fundamental information related thereto;

(b) Information regarding dividends and corporate announcements;

(c) Information regarding changes in corporate structure, such as mergers, demergers, acquisitions, termination, conversion, or transfer;

(d) Information regarding changes in capital structure;

(e) Information regarding expansion, change, etc., of business activities;

(f) Information regarding fund management and changes in the structure of the fund;

(g) Any information determined as price-sensitive information in any rules, regulations, orders, directives, or notifications issued or approved by the Commission;

(h) Any other information determined by notification issued from time to time by the Commission in the Government Gazette.

(2) In considering the price sensitivity of the information in sub-rule (1), the listed company or fund, or the issuer of securities, or the management authority or trustee of the fund, shall prepare the Principles on Disclosure of Material Information and Price Sensitive Information following Schedule-C, and shall publish such principles on their own website within 3 (three) months from the date of publication of these rules in the Government Gazette.

(3) The listed security issuer and fund manager shall publish material information on their own website following Schedule-C and in accordance with the principles described in sub-rule (2), and shall publish those considered as price-sensitive information under sub-rule (1) in accordance with Rule 6.

(4) The listed security issuer and fund manager shall preserve all price-sensitive information and material information published in the past 3 (three) years on their own website.

(5) The Commission may, by order published in the Government Gazette, determine any other information as price-sensitive information or material information.

(6) The listed company or fund, or the issuer of securities, or the manager or management authority or trustee of the fund, shall preserve the information of all insiders in the manner determined by the Commission from time to time, and shall supply such information to the relevant stock exchange and Commission:

Provided that, no officer of the relevant stock exchange or Commission shall disclose such information to anyone without the prior approval of the Commission.

4. Prohibition on Supply of Price Sensitive Information.—(1) Except as required by any other law, articles of association of the company, trust deed of the fund, or any other applicable rules and regulations, no insider shall disclose or supply any unpublished price-sensitive information to any other person, which has been submitted for approval to any listed security, any security applied for by a listed entity, or the relevant regulatory institution.

(2) The Commission may, by order published in the Government Gazette, determine the procedure for disclosure or supply of price-sensitive information or material information.

5. Prohibition of Insider Trading, etc.—(1) No insider shall engage in insider trading, either directly or through others, nor shall they provide personal advice or assistance in such trading.

(2) The following persons shall not purchase, sell, or otherwise transfer (receive/give) the shares of the said company, fund units, or securities during the period from two months prior to the date of completion of the annual accounts of any listed company or fund on the stock exchange (according to the English calendar) until the said account date:

(a) Any sponsor, director, chief executive, associated officer-employee, or auditor employed therein, asset valuer, credit rating company, advisor, or persons employed or involved in such work, or its holding company, or its directors, subsidiary company, or beneficial owner mentioned in Section-12 of the Securities and Exchange Ordinance, 1969; or

(b) The manager, trustee, custodian of any listed fund, other funds under the management of the same fund management company, or their directors, trustees, members, chief executives, and auditors, and persons employed in audit work; or

(c) Any other person determined by notification of the Commission in the Government Gazette.

6. Procedure for Supply of Price Sensitive Information.—(1) The issuer of securities listed on the stock exchange, or the manager of the fund, or in applicable cases, the trustee, shall send in writing, signed by its Chairman, Chief Executive Officer, or Company Secretary, simultaneously to the Commission and the relevant stock exchange, via e-mail, fax, digital submission platform, or special message, and in special cases via courier service, any price-sensitive information within 2 (two) hours of the decision to take a decision on the relevant matter or to submit a proposal for approval to the relevant primary regulatory institution, or immediately on the date it comes to its knowledge; and shall ensure immediate publication of such information in widely circulated daily newspapers (one in Bengali and one in English) and one online newspaper, and simultaneously publish the proposed information on the website by the relevant issuer or fund manager, or in applicable cases, the trustee.

(2) The issuer of listed securities, or the manager or trustee of the fund, shall not publish any false or untrue price-sensitive information with the intention of affecting the price of securities or units, nor shall they induce any person to publish or supply false or untrue information.

(3) The date and time of the decision of the board of directors of the issuer or fund manager or trustee, or in case, the date on which the information came to their knowledge, must be mentioned in such information sent and published by the issuer of listed securities, or the manager or trustee of the fund.

(4) In the announcement of any price-sensitive information regarding any matter concerning any security or the price-sensitive information of the issuer of the security or fund, it must be mentioned that a proposal has been sent to the relevant regulatory authority for approval, and within 02 (two) hours of obtaining the approval or decision of the regulatory authority on the said matter, the price-sensitive information must be ensured again in accordance with sub-rule (1).

(5) As soon as the relevant stock exchange receives such information, it shall publish it on the website of the said stock exchange, and disseminate it through the trading monitor or any other approved medium.

(6) Price-sensitive information must be published in simple and fluent language for any type of advisor.

(7) The occurrence of matters regarding price-sensitive information must be preserved in a digital database.

7. Consequences of Insider Trading, etc.—(1) If any person violates the provisions of Rule 4, Rule 5, and Rule 6, without prejudice to any other liability under the Act or provisions regarding penalties imposed on them, it is hereby provided that the Commission may take the following measures against them, namely:—

(a) If the said person is a registered market intermediary institution with the Commission, it may cancel or suspend its registration certificate;

(b) It may direct the person to acquire securities, shares, units, or stocks acquired through insider trading for a period determined by the Commission, or not to transfer the said securities, shares, units, or stocks for a period determined by the Commission, or to transfer them, and may direct the manager or issuer of the relevant company or fund to take consequential actions if such transfer is not effected or if consequential actions are not taken under such transfer:

Provided that, the Commission shall not take such measures against the relevant person without providing a reasonable opportunity of hearing:

Provided further that, if the Commission deems it necessary in any special case, it may issue an order for an unnecessary period under clause (b) before providing the opportunity of hearing under the first proviso, by recording reasons.

(2) If any insider, or the issuer of relevant securities, or the manager or trustee of the fund, or the management authority, or legal authority violates the provisions of Rule 4, Rule 5, and Rule 6, it shall be considered as fraudulent activity in accordance with the provisions of Section 17 of the Securities and Exchange Ordinance, 1969 (Ordinance No. XVII of 1969).

(3) Without prejudice to the provisions mentioned in sub-rule (1), the Commission may impose a fine on the accused person under the Act, or may take punitive measures according to the Ordinance if the accused person is charged with fraudulent activity.

(4) The Commission may take necessary legal steps to recover the profit or income acquired through insider trading from the insider.

8. Investigation.—(1) If, based on information received by the Commission, it appears to it that any person or insider has violated the provisions of Rules 4, 5, and 6, the Commission may appoint an investigating officer or an investigation committee consisting of one or more persons, hereinafter referred to as the Investigator, to investigate the matter, and may include an auditor in such committee if necessary.

(2) Before starting the investigation, the Investigator shall inform the relevant person or insider of the subject matter of the investigation through a written notice, and may, if necessary, issue a summons or through an appropriate representative, direct the said person or insider to present or submit documents, account books, and other papers and information, and the relevant person shall comply with such directions.

(3) The Investigator may examine any documents, account books, and information related to the investigation at any reasonable time, collect photocopies or copies thereof, and interrogate any relevant person, and the person concerned shall provide necessary cooperation to the Investigator.

(4) If any person fails to present or submit any documents, account books, or unauthorized information as directed by the Investigator, or refuses to answer the Investigator’s questions or provide cooperation, or if the Investigator considers that such person is evading such interrogation, they shall submit a report to the Commission to that effect, and the Commission shall take necessary measures according to the prevailing law.

(5) If, based on information obtained during the investigation, the Investigator considers it necessary to take control of or impose restrictions on the transfer of any security, share, fund unit, or stock for the purpose of the investigation, they shall submit an interim report to the Commission to that effect, and the Commission, considering the said report, may take control of the said security, share, fund unit, or stock for a determined period, or may issue any reasonable order regarding the same as it deems fit.

(6) The Investigator shall complete the investigation within the determined period and submit a report to the Commission.

9. Consideration of Investigation Report and Decision.—After receiving the investigation report, the Commission may, considering the said report, issue necessary orders or directives according to the rules, or may, according to the situation, issue any other order or directive within the purview of the Act for further investigation or to protect the interests of investors, as it deems fit.

10. Securities, Shares, Fund Units, or Stocks Acquired.—If control of any security, share, fund unit, or stock is taken under clause (b) of sub-rule (1) of Rule 7 or sub-rule (5) of Rule 8, the Commission shall preserve the said share, fund unit, or stock properly and return the said security, share, fund unit, or stock to its owner within the determined period.

11. Appeal.—Any person aggrieved by any order issued under Rule 7, sub-rule (5) of Rule 8, or Rule 9 may file an appeal according to the Securities and Exchange Commission (Appeal) Rules, 1995.

12. Compliance with Orders or Directives, etc.—The enforceable provisions mentioned in these rules shall be considered as compliance with the directives or orders issued under the Act or, in applicable cases, the Ordinance, and any violation of these rules shall be construed as a violation of the Act or, in applicable cases, the Ordinance.

13. Repeal and Savings.—(1) The Securities and Exchange Commission (Prohibition of Insider Trading) Rules, 1995 are hereby repealed.

(2) Notwithstanding the repeal, any act done, measure taken, order given, direction issued, application filed, appeal made, fee deposited, record or document preserved, investigation conducted, investigation report submitted, or notice issued under the repealed regulations shall be deemed to have been done, taken, given, issued, filed, deposited, preserved, conducted, submitted, or issued under these regulations.

“Schedule-C”
[Rule 3(2)]

Principles of Disclosure of Material Information and Price Sensitive Information

Among the aforementioned material information, issuers or fund managers or trustees shall disclose as price-sensitive information those pieces of information listed under Rule 3(1) regarding which the price sensitivity of securities or fund units remains, or those pieces of information that may be considered to have an impact on the investment decision of a reasonable investor.

Except for the aforementioned price-sensitive information, issuers or fund managers shall publish all other aforementioned material information on their official websites, as follows:—

1. Impact regarding changes in financial status, such as:—

(a) Changes in financial statements, such as: significant decrease or increase in income, expenditure, cash flow, receipts, liabilities, or assets, etc., and any information, statement, or comment regarding significant revaluation or significant decrease/increase in most or significant assets;

(b) Comparative information of the following financial statements:

(i) Earnings per share/unit;

(ii) Net operating cash flow per share/unit;

(iii) Net asset value per share/unit;

(c) Significant change in the value of the issuer’s or fund’s assets or the combination of assets;

(d) Any special instruction by the regulatory authority of the relevant issuer regarding provision retention, or any change in previously given special instructions; and

(e) Any change in the accounting policy of the issuer or fund, etc.

2. Information regarding corporate announcements, such as:—

(a) Any decision regarding dividends;

(b) Announcement of rights or bonus issue to security holders, or decision to issue or provide similar facilities;

(c) Corporate announcements or other information regarding investor entitlements; and

(d) Change in dividend distribution policy, etc.

3. Information regarding changes in corporate structure, such as:—

(a) Acquisition or termination of 5% or more of existing assets;

(b) Merger of a company with another company, or acquisition or purchase of significant shares of a company, etc.;

(c) Demerger of any unit of a company;

(d) Conversion or termination of any unit of a company;

(e) Change in corporate activities through capital reorganization, merger, or demerger;

(f) Takeover proposal or internal service acquisition proposal by any company;

(g) Change in ownership that may affect control of the company; and

(h) Change in name or address, etc.

4. Information regarding changes in capital structure, such as:—

(a) Any decision regarding private or public or rights offer of securities or change in capital structure;

(b) Repurchase or redemption of securities or fund units generally;

(c) Any decision regarding share consolidation, share exchange, conversion of any security into equity security, or conversion into debentures; and

(d) Significant change in the rights of security holders, etc.

5. Information regarding expansion, change, etc. of business activities, such as:—

(a) Any significant development or change regarding the company’s technology, production, or installation;

(b) Significant capital investment or significant change in the purpose of the establishment;

(c) Significant new contracts, production, patents, services, or business changes;

(d) Significant recovery of long-term advances;

(e) Change, resignation, or removal of the Chief Executive, CEO, CFO, Company Secretary, and other members of the Board of Directors;

(f) Change in statutory auditors or corporate governance compliance auditors, credit rating companies;

(g) Initiation of legal proceedings or development of regulatory matters, or any significant order or decree;

(h) Delisting of securities or fund units from the stock exchange, or change from one category to another;

(i) Any significant management contract, investor relations agreement, service agreement, or related party transaction that may significantly affect financial statements;

(j) Information regarding decision or plan for purchase/sale of any immovable property, or repair, development, or expansion (BMRE) of plants or machinery, or establishment of new units; and

(k) Significant advance or loan given or received among parent companies, subsidiaries, or associate institutions, or transactions with directors, etc.

6. Information regarding debt management, such as:—

(a) Borrowing and repayment of debt amounting to 25% or more of paid-up capital or net asset value, whichever is higher;

(b) Significant asset encumbrance or debt release;

(c) Failure to pay bank dues, creditor dues, or bond debts for more than 06 (six) months;

(d) Significant new loan contracts; and

(e) Foreign loan contracts or investment contracts, etc.

7. Information regarding fund management and structural changes, such as:—

(a) Extension or reduction of the fund’s term;

(b) Termination of the fund;

(c) Conversion of the fund;

(d) Investment of 10% or more of the fund in any single security;

(e) Profit or loss on significant investment liquidation; and

(f) Change in the composition of the fund’s trustees, change in the trust deed, etc.

8. Others, such as:—

(a) Signing of any important contract, or cancellation or significant amendment of previously announced/signed contracts;

(b) Loss of significant assets of the company or issuer, or any event damaging its reputation;

(c) Cancellation of any previously announced project or significant amendment thereto; and

(d) Submission of qualified reports by the issuer’s or fund’s auditors, etc.

By Order of the Bangladesh Securities and Exchange Commission

Professor Shibly Rubaiyat-ul-Islam
Chairman

Printed by Mohammad Ismail Hossain, Deputy Director (Deputy Secretary), Bangladesh Government Printing Press, Tejgaon, Dhaka.
Published by Hasina Begum, Deputy Director (Deputy Secretary), Bangladesh Forms and Publications Office, Tejgaon, Dhaka. website: www.bgpress.gov.bd