Stockbrokers and merchant banks with negative equity and unrealised losses will get until 2030 to adjust their existing shortfalls under a Bangladesh Securities and Exchange Commission (BSEC) decision that gives market intermediaries more time while imposing stricter conditions to protect investors.
Negative equity occurs when liabilities exceed assets, while unrealised losses are declines in investment value that have not been locked in through sales.
The regulator approved the extension for institutions that applied for the facility at its commission meeting on Tuesday, chaired by BSEC Chairman Masud Khan.
Institutions whose adjustment deadlines have already been extended will retain their existing arrangements, however.
During the interim government, the regulator opted for case-by-case extensions of accounting compliance deadlines, moving away from blanket regulations. The blanket solution returns on Tuesday.
Under the latest decision, affected institutions must make annual provisions of at least 25 per cent of the total amount required, starting in 2027, based on their negative equity position as of 30 September 2026.
They must continue provisioning each year until the existing shortfall is fully adjusted by 2030.
Any additional negative equity created during 2026 must be provisioned for and adjusted within the same year. Such losses cannot be added to the extended adjustment schedule.
The extension gives affected institutions more time to absorb accumulated losses, while the annual provisioning requirement prevents them from postponing the adjustment indefinitely.
The BSEC has also imposed restrictions on the affected beneficiary owner (BO) accounts to protect investors during the adjustment period.
Investors may sell existing shares in negative-equity BO accounts and use the proceeds to buy category A shares to rebalance their portfolios.
However, brokers cannot provide fresh margin loans for these purchases, and transactions in the affected accounts cannot be conducted through the block market.
No margin-loan interest or portfolio management fees may be charged to these accounts during the provisioning and adjustment period.
Investors also cannot be held financially liable for claims or obligations arising from negative equity in their accounts.
The affected stockbrokers, stock dealers and merchant banks will not be allowed to declare or distribute cash dividends during the extended period.
The restriction prevents affected firms from distributing cash to shareholders while they work to repair their financial positions. It also prevents investors from bearing additional charges or liabilities arising from negative equity.
The BSEC said the arrangement would allow institutions to adjust existing negative equity and unrealised losses gradually while protecting investors, maintaining market discipline and supporting market stability and confidence.
Stockbrokers hailed the decision as it would let struggling intermediary firms operate with a stronger financial statement.
