The government is preparing an ordinance to strengthen the legal foundation of the Capital Market Stabilisation Fund (CMSF) following backlash on its governance and operations.
On September 15, a meeting chaired by Finance Secretary Nazma Mobarek at the Secretariat discussed steps for the fund’s continuation, including measures to reduce its operational costs and improve governance.
According to sources at the meeting, one measure will be to reduce the size of its board from the 11 members at present to seven.
Additionally, the number of employees running the fund will be rationalized, and part of the CMSF’s 10,800-square-foot office space will be rented out to the Bangladesh Academy for Securities Market.
Bangladesh Securities and Exchange Commission (BSEC) Commissioner stated in the meeting that the CMSF’s legal foundation, established under the 2021 BSEC Rules, is weak, obstructing the formation of the board and implementation of necessary reforms.
In response, the Finance Secretary instructed an immediate move to create a new ordinance to address these issues.
The meeting also decided that the BSEC would take the necessary steps to ensure the continued operation of the CMSF while improving its governance.
Under the new structure, the CMSF board will be chaired by the BSEC chairperson. Other members will include an additional secretary from the Financial Institutions Division, the chairpersons of the two bourses, the Investment Corporation of Bangladesh (ICB), the President of the Bangladesh Association of Publicly Listed Companies (BAPLC), and the CMSF CEO.
The current 11-member structure allows BSEC to appoint a chairman, three members from any background meeting certain criteria, and one representative from professional communities such as accountants or financial analysts. It also includes representatives from the two bourses, central depository and central counterparty companies, and BAPLC.
The CMSF is set to shift away from the original market support concept and will now focus on investing only in fixed-income instruments such as government bills, bonds, and bank deposits. The fund will also prioritize investor education programs.
Initially formed with undisbursed dividends from listed firms, the CMSF’s original mandate was to stabilize the market through investments in listed securities.
However, amid criticism, the previous administration of the regulator lent Tk 225 crore and sponsored a mutual fund with Tk 50 crore to ICB instead of directly investing in listed securities.
Experts and stakeholders have raised concerns over potential conflicts of interest, as the regulator previously appointed CMSF board members who had control over its market operations.
Market support funds exist in other countries, but these are generally controlled by the respective finance ministries rather than the regulator.
Further criticisms of the CMSF include the appointment of board members with personal ties to former BSEC Chairman Shibly Rubayat-Ul-Islam, as well as high meeting fees for CMSF board members despite their limited contributions.
Currently, nearly Tk 700 crore of the CMSF’s more than Tk1,600 crore fund consists of undisbursed cash dividends from listed companies.
The actual owners of the fund are the unpaid investors, and the CMSF rules allow them to claim and retrieve their funds by following prescribed procedures.
