The securities regulator has fined Sikder Insurance Company Limited’s chairman, directors, managing director and company secretary Tk1 lakh each for failing to comply with conditions governing the use of Tk16 crore raised through its initial public offering (IPO).
The Bangladesh Securities and Exchange Commission (BSEC) found that the insurer deviated from its approved IPO fund utilisation plan by reallocating portions of the proceeds without obtaining the required approval from public shareholders.
The non-compliances included investing Tk20 lakh above the approved allocation for fixed deposit receipts (FDRs), failing to utilise about Tk1.4 crore earmarked for capital market investment, not using the Tk6.09 crore allocated for office purchase and transferring unused IPO expense funds to FDRs without prior approval.
The action reflects BSEC’s focus on ensuring that listed companies use funds raised from public investors according to disclosed plans, as any changes require compliance with approval procedures to maintain transparency and accountability for shareholders.
In an order issued on 16 September, BSEC said the non-life insurer violated Condition 6 of Part C of its IPO consent letter issued on 22 November 2023.
The penalties were imposed on Sikder Insurance Chairman Nasim Sikder, Vice Chairman Mamtazul Haque Sikder, Directors Lisa Fatema Haque Sikder, Mohtasim Billah Khan, Monica Sikder Khan, Jonas Sikder Khan, Salah Uddin Khan, Jeffrey Khan Sikder and Mandy Khan Sikder, Managing Director and CEO Sk Abdur Rafique, and Company Secretary Abdur Razzak.
The commission took the action after issuing a show-cause notice and conducting a hearing on 8 June. Separately, BSEC warned the company to ensure stricter compliance with securities laws in future.
The warning followed Sikder Insurance’s submission of documents showing subsequent compliance steps.
However, disposal of the matter did not remove the company’s legal responsibilities towards any affected parties and cautioned that future violations would invite enforcement action, BSEC said.
According to the regulator, Sikder Insurance received Tk16 crore in its escrow account with National Bank on 14 January 2024 after raising funds through the IPO.
According to the IPO prospectus, the proceeds were allocated for four purposes – Tk4 crore for FDR investment, Tk4.8 crore for capital market investment, Tk6.09 crore for purchasing office space and Tk1.11 crore for IPO-related expenses.
BSEC found that the company invested Tk4.2 crore in FDRs, exceeding the approved allocation by Tk20 lakh.
The company said the additional amount was shifted from IPO expense funds to secure better returns. The regulator, however, found that the reallocation was made without prior approval from at least 51 per cent of public shareholders.
The insurer also failed to fully utilise the capital market investment allocation. Against the approved Tk4.8 crore, BSEC found that around Tk3.4 crore was invested, leaving about Tk1.4 crore unused.
Sikder Insurance attributed the shortfall to liquidity problems at National Bank, saying cheques issued for investment purposes could not be encashed.
BSEC said the failure to utilise the funds within the disclosed timeframe affected the intended purpose of the IPO proceeds and shareholders’ interests.
The regulator also found that the company did not use any portion of the Tk6.09 crore allocated for purchasing office space.
Sikder Insurance told BSEC that it could not identify a suitable location due to market conditions. The company later obtained shareholder approval to invest the amount in government treasury bills.
BSEC further found that the company spent Tk90 lakh out of the Tk1.11 crore allocated for IPO expenses. The remaining Tk21.28 lakh was transferred for FDR investment without prior approval from public shareholders.
During the hearing, company representatives said Sikder Insurance was taking steps to properly utilise the remaining funds and that delays were mainly linked to National Bank’s liquidity situation.
BSEC rejected the explanations and held the responsible officials accountable for the non-compliance.
The regulator directed the penalised officials to pay the fines within 30 days through bank draft or pay order in favour of BSEC, failing which further action would be taken under securities laws.
The capital market watchdog also warned Sk Abdur Rafique, managing director and CEO of Sikder Insurance, for failing to ensure due diligence and advised him to exercise greater caution in future compliance with securities-related obligations.
