Securities and Exchange Commission

Date: 25.11.2011

Various Steps Taken for Stabilizing the Capital Market and Protecting the Interests of Small Investors:

Short-term Measures: Immediately Implementable

1. The capital contributed by a bank to its subsidiary engaged in share trading will not be counted as the bank's 'exposure to capital market'.

2. Long-term equity investment by a bank in any company's shares will not be counted as the bank's 'capital market exposure'.

3. Arrangements will be made to allow prompt remittance of necessary documents/auctions required for payment of commission to foreign brokerage firms in the case of foreign institutional investors. Consequently, foreign portfolio managers will be further encouraged to invest more funds in the Bangladesh capital market.

4. It has been decided to withdraw the 10% Capital Gain Tax imposed on profits earned from investment in the capital market by foreign institutional investors and non-resident Bangladeshis. This will include foreign investment in the market and increase the flow of Foreign Funds.

5. In the case of provision maintenance against potential loss for encouraging bank investment in the capital market, gain/loss can be netted off to calculate provisions. Note that previously only net loss was considered.

6. If a bank or financial institution engaged in share trading exceeds the single borrower exposure limit for its subsidiary, it will get a period of 2 years (until December 2013) to consolidate the excess loan.

7. Commercial banks have agreed to invest more heavily in the capital market on the advice of the Honorable Finance Minister.

8. Insurance funds (SIF and non-SIF) have agreed to invest their investible funds in the capital market immediately. Additionally, the government will provide necessary assistance for the development of the insurance industry.

9. In many cases, the total shareholding of Sponsors/Directors of listed companies in the share market is below the expected limit. For the stability of the capital market, the SEC has decided to make it mandatory for promoters and directors of companies to hold a minimum of 30% shares at all times.

10. Until now, parent companies (banks, financial institutions, and industrial companies) supplied up to 99%-100% of the funds for market banks and subsidiaries. Now, according to the Commission's decision, market banks and subsidiaries can raise capital savings with a minimum of 51% from the parent company and the remaining part from any other fund source. This will increase the capital of market banks and subsidiaries and thereby end the crisis in the short term.

Medium-term Measures: Three (3) Months

1. To create a complete capital market instead of a hype-driven and news-sensitive share market, the SEC will take steps to open Investment Advisory Services. Brokerage houses, whether institutional or non-institutional, are hiring professional, skilled, and experienced investment managers.

2. To ensure Access to information for Investors, Academicians, and Policy Makers, the SEC will open Equity Research Publications.

3. Corporate Governance Guidelines will be created to ensure transparency and accountability of listed companies in the capital market.

4. The SEC will take quick steps to find ways to increase the own capital of market banks and subsidiaries.

Long-term Measures: 4 to 6 Months

1. The Financial Reporting Act (FRA) will be formulated to improve the quality of Accounting and Auditing Disclosure of Listed Companies in the capital market.

2. The current Insider Trading law of the SEC is very weak. It will be made deeper and stricter. By doing so, investor confidence will return.

3. Our country's Small Investor Protection Law is unable to protect the interests of small investors. This law will be amended along the lines of developed countries.

4. To ensure corporate governance of stock exchanges, our stock exchanges will be quickly demutualized.

5. The SEC will take necessary steps to make the Mutual Fund sector stronger and more attractive for investors.

6. The SEC will strengthen its investigative activities in the capital market through the establishment of an advanced service system so that investors are not defrauded.

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Special Committee for Protection of Small Investors' Interests:

1. A special committee is being formed to protect the interests of small investors who have suffered significant losses due to investing in the capital market with small capital and margin loans. To this end, a committee of 6 (six) members will be formed with the Managing Director of ICB (ICB) as Convener. Other members of the committee will be:

   (1) A representative of the Ministry of Finance (Bank and Financial Institutions Division) (2) A representative of the SEC (3) MD/CEO of CDBL (4) CEO of Dhaka Stock Exchange, and (5) CEO of Chittagong Stock Exchange.

   The committee may co-opt additional members if necessary. This committee will submit a complete report to the Bank and Financial Institutions Division of the Ministry of Finance for consideration within two (2) months.

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Professor Dr. M. Khairul Hossain
Chairman
SEC

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Copy to: (For necessary action)

1. Governor, Bangladesh Bank.
2. Chairman, National Board of Revenue.
3. Secretary, Bank and Financial Institutions Division, Ministry of Finance.
4. Chairman, Insurance Development and Regulatory Authority.
5. President, Bangladesh Association of Bankers.
6. Chairman, Bangladesh Industrial Association.
7. President, Association of Bankers Bangladesh.
8. President, Dhaka Stock Exchange Ltd.
9. President, Chittagong Stock Exchange Ltd.