A writ petition challenging several provisions of the Margin Rules, 2025, formulated by the Bangladesh Securities and Exchange Commission (BSEC) has been filed in the High Court.
The petition, filed by SM Iqbal Hossain, raises concerns that certain provisions of the newly introduced rules could harm both investors and the capital market.
The petitioner’s lawyer, Md Kamal Hossain, confirmed to Times of Bangladesh that the hearing for the writ petition took place on Tuesday.
A decision on the matter is expected to be delivered by Wednesday, he said.
The writ, numbered 18539/2025, was filed with the High Court Division of the Supreme Court.
The petitioner argues that various provisions of the newly introduced margin rules, issued in a government gazette on November 6, could adversely affect investors.
Specifically, sections 6(5), 6(6 & 9), 7(5 & 6), 7(7), 9, 10, and 11 are highlighted as problematic.
These provisions were accepted and implemented by the regulatory authority despite concerns regarding their potential negative impact on the market.
The petitioner has requested the annulment of these provisions, asserting that their implementation would undermine investor confidence and harm the capital market.
Among the provisions challenged is Section 6(5), which limits the duration of margin loan agreements to one year.
After this period, agreements can only be renewed with mutual consent.
Section 6(6) stipulates that if the agreement is not renewed within 30 business days, the securities must be sold to settle the loan.
Additionally, Section 6(9) prohibits margin loans from being granted to students, housewives, or retirees.
However, the petition notes that housewives or retirees with significant assets and transparent income sources can still obtain margin loans, subject to the lender’s internal policies.
The petitioner claims this provision is discriminatory.
In response, BSEC’s Director and Spokesperson Abul Kalam told Times of Bangladesh that the new rules were designed to ensure market stability.
He further explained that high-net-worth housewives and retirees could still access margin loans if their income and asset sources were clearly documented.
Other provisions under scrutiny include Section 7(5), which limits margin financing companies from providing loans greater than a 1:1 margin ratio.
In the case of a market price-to-earnings (P/E) ratio exceeding 20, the ratio drops to 1:0.5.
Similarly, for investments between Tk 5 lakh and Tk 10 lakh, the ratio is capped at 1:0.5.
For shares of life insurance companies, the margin ratio is restricted to 1:0.25, and margin loans are prohibited unless the company’s most recent actuarial valuation is available.
Section 9 of the new rules stipulates that the customer’s equity as margin collateral should not be less than 75% of the total margin financing.
If the market value of the investor’s portfolio falls below a certain threshold, the brokerage house or merchant bank is required to ask for additional funds within three days, or else the transaction will be blocked.
In the event of a market downturn, the lender can sell shares to adjust loans to maintain the margin ratio.
Additionally, the new rules prohibit margin loans for shares listed in categories other than A and B on the main board.
If a B-category company fails to distribute at least 5% of its earnings as dividends, margin loans for its shares will be prohibited, and the shares must be sold from margin accounts within 60 working days.
Section 11 imposes a restriction that requires a customer to have invested at least Tk 5 lakh in the previous year to qualify for margin loans.
The petitioner claims that these provisions infringe on the fundamental rights of investors, as outlined in Articles 27, 31, and 44 of the Constitution of Bangladesh.
The petitioner has requested that the High Court issue a rule nisi, asking the BSEC and relevant authorities to explain why these provisions should not be declared illegal, unconstitutional, and void.
