Written on 4:41 PM by College Corp
CSE – Bangladesh
Annex 2.1 – Chittagong Stock Exchange (CSE), Bangladesh - Self-assessment
responses to the Questionnaire
Part 1 – Information on the nature and operation of the listing regime
1. PRINCIPLES OF LISTING REGULATION
1. Give an overall indication of the main characteristics of your listing regime.
- Chittagong Stock Exchange Ltd. (CSE) grants access to public limited companies to
list in the Exchange, thus providing its securities a securities trading facility. CSE has
an automated trading system with satellite based a network connecting three major
cities: Dhaka, Chittagong and Sylhet. CSE also initiated Internet Trading Services for
investors to trade its listed securities from anywhere in the world which in turn
facilitates the listed companies to liquidate their securities with fair and transparent
pricing. While listing CSE ensure the fulfilment of qualitative and quantitative eligibility
criteria by the companies. At initial listing companies, CSE make sure of exacting
compliance of listing rules and regulation by the listed companies to provide a efficient
and transparent market of international standard.
-
- The Securities and Exchange Commission is the final authority to approve an IPO.
The Exchanges’ role is limited to comments of the information in the prospectus.
Chittagong Stock Exchange has to compete with the other stock exchange in
Bangladesh (the Dhaka Stock Exchange), who is much older and whose brokers are
much experienced, in general. CSE often offer discounted fees to the new company
listing.
2. HISTORICAL DEVELOPMENT, QUALITY OF MARKETS AND LISTING
STANDARDS
1. Briefly describe the history and development of stock markets and listing of
companies on your exchange.
- Dhaka Stock Exchange, the first stock market in Bangladesh was incorporated on 28th
April 1954. Its trading activities were suspended after independence of Bangladesh in
1971 and resumed its operation in 1976.
- Four decades after establishment of Dhaka Stock Exchange, Chittagong Stock
Exchange started its operation from 10th October 1995, with an open outcry auction
system. In the backdrop of a strong need to institute a dynamic automated and a
transparent stock exchange in the country, seventy reputed business personalities
established the CSE in the commercial capital of Chittagong. Only 30 securities were
listed on the first day trading when market capitalization stood at US$0.2 Billion. Now
CSE is a completely automated exchange with a screen-based trading facility on a
countrywide communication network.
-
- The main objectives of CSE are:
- To develop a strong platform for the entrepreneurs for raising capital.
- To develop a transparent market ensuring investor protection
- To provide fully automated trading system
- To ensure quick, easy settlement system
- To attract non-resident Bangladeshis to invest in Bangladesh Stock Market
- To develop a high standard of commercial practice
- To develop a research cell for analysis status of the market
-
Is your exchange the only official (regulated) securities exchange in your country?
-
- No. We have two official (regulated) securities exchange in our country:
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- Chittagong Stock Exchange
- Dhaka Stock Exchange
2. If there are also other regulated exchanges, what is their relationship with your
exchange e.g. do the exchanges compete for listings, and if so what form does the
competition take e.g. lower fees, differential regulations etc? Is there cross-listing /
trading between the exchanges?
- Listing in both the Exchanges is not compulsory. So the exchange competes for
listing by lowering the fees, if required. There is no cross-trading between the
Exchanges.
- Both the exchange discuss over phone or sometimes arrange a meeting if and when
any unusual market action happens due to alleged violation of rules and regulations by
the listed companies. On enforcement issues CSE try to liase with the DSE to take
action simultaneously by the Exchanges against a company listed on both the
exchanges
3. Provide statistical information on the profile of your market, including:
- the dimensions of the listed market e.g. number of companies, market capitalisation,
breakdown between domestic and foreign companies (if applicable), sizes of
company, industry type etc.
- Number of companies: 172 as of today (this figure includes only 5 multinational
companies. No absolute foreign companies are listed in our market)
- Market Capitalisation : 1.02 billion dollar
-
- Sizes of Company : below 100 million -75 cos.
- (Paid–up capital in local currency): from 100-500 million – 86 cos.
- : from 500-1000 million –8 cos.
- : above 1000 million –3 cos.
- Industry sectors:
- Banking and Finance
- Insurance
- Textile & Clothing
- Pharmaceutical & Chemical
- Food & Allied
- Cement
- Engineering
- Leather & Footwear
- Real Estate & Service
- ICT
- Paper, Printing & Packaging
- Energy
- Ceramic
- Mutual Fund and
- misc
ß the investor profile e.g. domestic and international institutional investors, retail
investors etc.
- Currently no international institutional investors are active in our market other than the
only major domestic institutional investor called Investment Corporation of Bangladesh
(ICB).
ß listing of domestic companies overseas (equity and depository receipt form)
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- No domestic companies are listed overseas
ß market performance and liquidity.
- (from 1st April 2003 to 30th June 2003)
- Turnover (value) in local currency ; 2,603 million
- Turnover (volume): 45 million
- Number of Contracts: 48,313
- Number of company traded; 137
- Turnover Ratio: 4.3%
3. LEGISLATIVE AND REGULATORY FRAMEWORK FOR LISTING
1. Describe the legislative and regulatory context for regulation of public companies and
exchange listing in your jurisdiction/ exchange. For example, is regulation provided for
by company law, securities law and regulations, exchange listing rules, or a
combination of these?
- The Companies Act, 1994
- The Securities and Exchange Ordinance,1969
- The Securities and Exchange Commission Public Issue Rules,1998
- Right Issue Rules 1998
- The Listing Regulations of the Chittagong Stock Exchange Limited - CSE
2. Summarise the main regulatory provisions relating to corporate and listing regulation.
- The main provisions that includes in the above-mentioned regulations are as follows:
- “The Companies Act, 1994” – Details of the regulations required for all public
companies and also the companies intends to issue prospectus.
-
- “The Securities and Exchange Ordinance, 1969” - Regulation on the details for the
registration, functioning and compliance by the Exchange, Cancellation and
suspension of registration of the Exchange, Listing of Securities and suspension and
de-listing of securities.
-
- “The Securities and Exchange Commission Public Issue Rules, 1998” Regulation for
public companies who intends to issue initial public offerings
-
- “Right Issue Rules 1998” - Regulations for public listed companies intends to issue
right shares
-
- “The Listing Regulations of the Chittagong Stock Exchange Limited –CSE”
-
- Criteria for Initial Listing;
- Listing Procedure
- Continuing Obligations -on going disclosure requirement
- Compliance Monitoring and Enforcement
-
4.INSTITUTIONAL RESPONSIBILITIES FOR CORPORATE AND LISTING
REGULATION
1. Outline the responsibilities and roles in listing regulation of government departments,
securities regulatory bodies (e.g., SEC) and/or the stock exchanges respectively.
- IPO:
- The Stock Exchange and the SEC ensure at the point of initial public offering whether
the issuer made full disclosure in the prospectus necessary for informed investing. The
SEC while approving the prospectus bear no responsibility for the information
disclosed by the issuer to the market. As per CSE Listing Regulations the prospectus
shall conform to and in accordance with the requirement and provisions of Companies
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Act, 1994, Securities and Exchange Ordinance, 1969, Securities and Exchange Public
Issue Rules 1998 and any other law required for the time being applicable.
- Initial Listing:
- The Stock Exchange considers whether applicant companies meet the listing criteria
of the Exchange and also considers the sufficiency of public interest in the company.
SEC may direct the stock exchange to list a company in the public interest.
- Continuous Listing Requirement:
- The Securities and Exchange Commission Rules 1987 includes the listing regulations
relating to submission of periodic report, annual report by issuers etc. As per Section
2CC of the Securities and Exchange Ordinance, 1969 the SEC may impose any
condition to the issuer at any time which mostly are related to the on going obligations
to be complied with by the listed companies.
-
- The CSE Listing Regulation outline the responsibility of the Exchange to ensure the
compliance of the followings:
- Continuing Obligations - on going disclosure requirement
- Compliance Monitoring and Enforcement
-
Provide details of how regulatory responsibilities are discharged by the Exchange and
how they are regulated by government or securities commission e.g. requirements for
licensing and supervision of the Exchange.
-
- The Stock Exchange discharges its regulatory responsibilities by ensuring the
compliance of continuous listing requirement by the listed companies. For this purpose
CSE monitors the followings on regular basis:
-
- - timely and orderly release of price sensitive information by issuers;
- - the content of disclosures by issuers;
- - content of all statements, accounts, report;
- - adherence to the commitment made by the company
-
- If unusual market action occurs due to rumour or report or to material information that
has not been publicly disseminated the Exchange requests the company to take
appropriate corrective action, and its trading remain suspended until such action has
been taken.
-
- In case of violation of listing regulation, CSE send “show cause” notice to the Listed
Companies and if it’s response to the notice is not satisfactory the CSE Listing
Committee recommend to the Board to fine, suspend or de-list a company.
-
- Any inspection, if required, to inspect on any unusual/criminal act of listed companies
may be conducted by the Exchange. However, in most cases Stock Exchange refer
such cases to SEC.
-
- A stock exchange cannot operate or carry its functions in Bangladesh without getting
registration from SEC. The Exchange shall submit the Annual Report and periodic
return in relation to its affairs to SEC. SEC may at any time by order ask for
documents, information or explanation relating to the affairs of the Exchange and
may:–
-
- a. suspend for a period the transaction of any business on the Exchange;
-
- b. cancel the registration of the Exchange;
-
- c. supersede the CSE Board or other authority of the Exchange;
-
- d. remove director officer and member of the Exchange.
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2. Describe the arrangements for the delegations from the Exchange’s Board (or
governing body) for the discharge of its regulatory functions e.g. to a Listing
Committee, or through delegation to executive staff, or a mixture of both?
- The Board of Director of CSE delegates any of their power to a Listing Committee
consisting of its elected and non-elected director, broker, dealer and Senior Executive
of the Exchange.
-
- The Listing Committee is delegated the power by the Board to recommend for listing a
company after scrutinising the papers and documents submitted by the company with
the listing application. The Committee also ensures the compliance of continuous
listing by reviewing, discussing and taking action against the listed company in
accordance with Listing Regulation of CSE
3. What is the ownership and governance model of your exchange, and how does this
impact the Exchange’s discharge of its regulatory functions?
- CSE is a public limited company owned by 129 corporate members.
-
- The CEO supported by a group of executives have the executive power to run,
superintend and effectuate the day to day operation, administration and general
management of the Exchange to implement and enforce the Articles of Association,
General rules and regulations, bye laws of the Exchange. The CEO however as per
Articles of Association of CSE act as under the direct guidance, supervision and
control of the Board and the Committee.
-
- The organisation chart of the Exchange is attached at the end of this annex.
4. Are there any plans to alter the ownership and governance structure e.g. by de-
mutualising or broadening ownership of the Exchange?
-
- CSE have no such plans.
5.LISTING RULES
Summarise briefly the main areas of coverage of your exchange’s listing rules (please note
later questions will require further detail on specific aspects).
- See below.
-
6. USE OF ADVISERS IN THE LISTING PROCESS AND DUE DILIGENCE
PROCEDURES
1. Describe the roles of the following financial and professional advisers in the listing
process:
- All public issue must be managed by at least one Merchant Banker. A Merchant
Banker make arrangements regarding selling, buying, underwriting or subscribing to
securities as underwriter, manager, consultant, advisor or rendering corporate
advisory service in relation to issue management.
- A Financial Statement and a Report by an Auditor is required in the prospectus as well
as in the listing process with the Exchange
2. Does your exchange/ securities regulator require the appointment of sponsors (i.e.
specialist the financial intermediaries such as investment bankers, that advise the
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issuers or underwrite the issues coming to the market) for initial listing and/ or
ongoing listing?
- A merchant banker functions as the Manager to the issuer, to assist the company
during the initial listing or ongoing listing.
3. If sponsors are required, what are their regulatory status, responsibilities and
functions?
- A Merchant Banker is required to be registered with SEC to do the underwriting, and
issue Management activities. In order to facilitate public offering merchant banks plays
a vital role by doing the followings responsibilities and functions:
-
- The Manager to the Issue is responsible for verification of the contents of prospectus
and the reasonableness of the views expressed thereon.
- The Manager to the Issue ensures that the modification and suggestion, if any, made
by SEC are incorporated in the prospectus.
- The Manager to the Issue shall furnish to the SEC all information and documents
required to comply with the entire regulatory requirement for the issue.
4. Describe the due diligence practices carried out for IPO’s, and how they have
developed.
- The Merchant Bankers provide due diligence certificates. It became mandatory by a
rules framed in 1996 by SEC named “Securities and Exchange Commission
(Merchant Banker and Portfolio Manager) Rules,1996”.
-
7.REQUIREMENTS FOR ELIGIBILITY/SUITABILITY FOR LISTING, MARKET
SEGMENTS AND DIFFERENTIAL REGULATION OF MARKETS AND PRODUCT
TYPES
1. Summarise the main qualitative and quantitative eligibility criteria for initial listing
contained in your listing rules.
-
- The main eligibility criteria for initial listing contained in CSE Listing Regulations are as
follows:
- The Company shall be a Public Limited Company under the Companies Act,1994
- Minimum Paid up capital of the applicant company shall be Tk. Ten Million
- The applicant company has to made a public issue which is subscribed by not less
than 250 applicants
- Application to the Exchange or listing within 10 days of publication of prospectus
- A Company applying for listing on the Exchange, shall pay an initial listing fee
equivalent to one forth of one percent of the paid-up capital.
- Submission of Undertaking under a common seal
-
- The following documents and particulars duly certified by the Company or the
Company Secretary or authorised representative presenting the Security shall be
submitted to the Exchange at the time of application for listing or any time on demand
by the Exchange:
- Memorandum & Articles of Association;
- Copy of the Certificate of incorporation;
- Copy of the Certificate of Commencement of Business;
- Copy of the Feasibility Report, in case of a new project:
- Copy of the Certificate of Registration of the industrial units issued by the Board of
Investment or any other competent authority;
- Copies of the title or lease deeds of the land;
- Copies of all material contracts and agreements entered into or exchanged with
foreign participants, machinery suppliers and any other financial institutions;
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- Copies of Letter(s) of Credit established in favour of Machinery Suppliers, if linked with
the public issue;
- Copy of Consent Order issued by the Commission;
- Copy of authorisation for flotation of Modaraba or Mushariqa or any Security by the
Commission;
- Names of Directors along with directorship of other companies listed on the Exchange;
- Draft Prospectus/Offer for Sale;
- Auditors’ Certificate for the amount subscribed by the Promoters / Directors /
Subsidiaries / Associates;
-
- Copies of the agreements relating to issue of Securities for consideration other than
cash, if any;
- Copy of underwriting agreement (if any) and No Objection Certificate (NOC) from the
underwriters to publish the prospectus. Underwriting public issue is not compulsory for
listing on the Exchange;
- Statement of audited accounts for the last 5 years or for a shorter number of years if
the Company is in operation only for such shorter period;
- Statement showing the cost of project and means of finance;
- Copies of the approval of tax-holiday application under Income-Tax Ordinance, 1984;
- Copies of Consent Letters from Bankers or Financial Institutions to the Issues;
- Any other documents/material contract and such other particulars as may be required
by the Exchange or by the Board and/or by the Commission.
2. Are there explicit de-listing/ cancellation of listing criteria, and, if so, what are the
procedures for de-listing?
-
- Voluntary Delisting
- Compulsory delisting by Stock Exchanges
- Delisting pursuant to a Rights Issue
- Yes there is explicit de-listing/cancellation of listing criteria in the CSE Listing
Regulation, which are as follows:
- Fails to comply with the requirements of any of CSE listing regulations;
- Where the Exchange considers it necessary for the protection of investors;
- Fails to pay penalty or any other dues payable to the exchange for a period of two
years;
- Fails to declare dividend or bonus for five years from the date of declaration of last
dividend or bonus; or in the case of manufacturing companies, for five years from the
date of commencement on commercial production; or for five years from the date of
commencement of business in all other cases
- Fails to hold its AGM for a continuous period of three years
- Gone into liquidation either voluntarily or under court order;
- Fails to pay the annual list fees for a period of 2 years
- If securities are quoted below 50 per cent of face value for a continuous period of
three calendar years.
- No company will be de-listed from CSE unless the company has been given an
adequate opportunity of being heard. Neither stock exchange nor SEC got any
guidelines or detailed rules relating to procedure for de-listing.
3. Is differential regulation applied to market segments or product types e.g. is there a
second market (also sometime called second board or development companies
market) or other types of securities listed (e.g. debt securities)?
- CSE list debenture in its market.
4. If so, please supply details of the regulatory standards and listing procedures applied
to each separate market and product type.
-
- The public company issuing debentures requires to appoint a debenture trustee to
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protect the interest of debenture holders. It may be a bank, a financial institution or an
insurance company.
5. Are differential regulatory requirement applied to any specialist types of issuers (e.g.
property or technology companies)?
- There is no significant difference in regulatory requirement applied to any specialist
type of issuers.
6. What are the factors effecting the willingness and ability of public companies to apply
for listing on your exchange (e.g. costs, concerns of founders on diluting control,
requirements of listing rules etc.)?
- Listing Fee in our Exchange is discounted on case to case basis.
- Listing in both the Exchange at a time is a prestigious factor for company to be
appeared in the market.
- Diluting control also discourages the company to list in our exchange sometimes
- CSE automated trading system with satellite based network connecting three major
cities: Dhaka, Chittagong and Sylhet encourages the company to list in our exchange.
7. Provide detailed information on the cost of initial listing and maintaining a listing on
your exchange, and compare this with the costs of raising funds form alternative
sources of business funding in your economy. If detailed information is not readily
available please provide anecdotal information on the costs, broken down to indicate
the relative costs of advisory/ underwriting fees, accountant’s fees, listing fees payable
to the Exchange, other regulatory fees etc.?
- Alternative source of business funding in Bangladeshi is mainly banking sector.
Financial expenditure in the Bank is 15% to 17% of loan amount while cost of raising
fund from stock market is 7% to 8% of total issue.
-
- IPO Expenses
Head of expenses Calculation of cost
Issue Manager Fee : Usually varied from 1% to 2.00% of total
issue
Regulatory Expenses :
SEC Fee:
Consent Fee: 0.30% of entire offering
Listing Fee: DSE,CSE 0.25% on paid up capital in both the
Exchange
Service Charge in DSE BDT 5000/-
Annual Fee Details of fee slab wise is as below
IPO Commission:
Underwriting Fee Usually varied from 1’5% to 2.5% of the
value of shares underwritten
Banker to the Issue Usually varied from 1% to 2.25% on
collected amount
Brokerage Commission 1% on successful application
CSE Annual listing fee
Slab/Paid-up Capital
(BDT. In Million) Rates of Annual Listing Fees in Taka
Up to 10 10,000
Above 10 & Up to 20 15,000
Above 20 & Up to 30 20,000
Above 30 & Up to 40 25,000
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Above 40 & Up to 50 30,000
Above 50 & Up to 75 35,000
Above 75 & Up to 100 40,000
Above 100 & Up to 125 45,000
Above 125 & Up to 150 50,000
Above 150 & Up to 200 55,000
Above 200 & Up to 250 60,000
Above 250 & Up to 300 65,000
Above 300 & Up to 400 70,000
Above 400 & Up to 500 75,000
Above 500 & Up to 600 80,000
Above 600 & Up to 700 85,000
Above 700 & Up to 800 90,000
Above 800 & Up to 1000 95,000
Above Above 1000 100,000
8.SOURCES OF INFORMATION AT INITIAL PUBLIC OFFERING/ LISTING, IPO
DOCUMENT APPROVAL AND LISTING APPLICATION PROCEDURES
1. Prospectus and registration requirements:
Summarise the requirements from company law, securities law or other regulations and rules
for the publication of a prospectus or listing document.
- The issuers appoint a Merchant Banker to manage the issue on its behalf. The
Merchant Banker submits the draft prospectus with full, fair and adequate disclosures
to the SEC and the stock exchanges on which listing is sought.
-
Approval of prospectus
- No public company can issue a prospectus in Bangladesh without prior approval of
SEC. The SEC approves a prospectus on a full and fair disclosure basis and not on
merit basis. Upon receiving the consent of SEC to the issue of capital, the prospectus
shall be published by the issuer in two daily newspapers within ten days of such
receipt.
Registration of the prospectus
- Every prospectus shall be delivered to the Registrar of Joint Stock Companies for
registration of a copy,
- No prospectus shall be issued more than ninety days after the date on which a copy
thereof is delivered for registration
- Submission of Undertaking under a common seal
Application for listing on stock exchange
- Application for listing to at least any one recognized stock exchange within 10 days of
publication of prospectus.
Prospectus delivery requirements
- The prospectus shall be widely disseminated to the underwriters, brokers participating
in the distribution, each stock exchange where the securities are to be listed, Bankers
to the issue and SEC. Sufficient copies are required to be made available by the
issuer so that any person requesting a copy may receive one.
- Fee on Initial Public Offering
- The issuer shall have to pay to the Commission a fee @ 0.30% on the total amount of
Pre-IPO placement and Initial Public Offering (IPO) at the time the consent of is
indicated to the issuer.
-
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Initial Listing Fee
- A Company applying for listing on the Exchange, shall pay an initial listing fee
equivalent to one quarter of one percent of the paid-up capital.
2. Further issues:
Do further issues of securities require the publication of further information, and if so what are
the specific requirements?
- Rights issues require the publication of further information through a Rights Share
Offer Document. The document shall be furnished to SEC and also to all stock
exchanges and all existing shareholders, at least fifteen days prior to opening of
subscription lists for the rights shares. It shall include, among others the following
information:
- Date of the right offer document
- The period of subscription list which shall be open for at least fifteen days and not
more than thirty days
- Amount of right share divided into number of shares, par value and issue price of each
share and number of right share offered for each existing share;
- Highlight of the right offer, risk factors and management plans for reduction of such
risks;
- Purpose of raising further fund specifying clearly the heads and amount of the fund
utilization;
- If the issue price of right share is higher than the par value thereof justification of the
premium should be stated;
- Forecast cash flow statement, profit and loss account and balance sheet
- Statement of actual utilisation of fund raised by IPO of shares of right offers
3. Prescribed information disclosure:
What information is required to be disclosed in a prospectus or listing document? Please
summarise the main areas of information required. Examples of areas are information on:
- the persons responsible for the prospectus, auditors and other advisers
- the shares to be listed
- the company and its capital
- the company’s activities
- the issuer’s assets and liabilities, financial position and profits and losses for the track
record period
- the issuer’s management, and
- recent developments and prospects of the company.
- The main areas of information required to be disclosed in a prospectus or listing
document are as follows:
- The persons responsible for the prospectus, auditors and other advisers –Though the
SEC gives consent to issue prospectus the Commission does not take any
responsibility for the financial soundness of the company, any of its projects or the
issue price of its share or for the correctness of any of the statement made or opinion
expressed with regard to them. The responsibility for the prospectus lies with the
Issuer, its Directors, Investment Advisor, Underwriter, Issue Manager, Valuer and/or
Auditor.
- The shares to be issued/listed
- The subscription list shall be opened and the sale of securities commenced ten days
after of the publication of the prospectus and shall remain so open for a period not
exceeding fifteen days thereafter. This period shall be disclosed in the prospectus.
- The amount and type of securities being issued. 10% of all issues offered for
subscription shall be reserved for non-resident Bangladeshi and the remaining 90%
shall be open for subscription by the general public.
- The offering price of the securities on a per unit and aggregate basis.
- If common stock is being offered, the factors considered in determining the offering
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price.
- Description of securities outstanding or being offered.
- Details of the amount of shares Privately Placed with investors, both local and foreign
including their names and address.
- Name of the Exchange in which share is to be listed and any conditions that need to
be met by the company before trading on such stock exchange can commence shall
also be explained.
- The company and its capital-
- The name of the company, the date on which the company was organized and the
date on which it commenced operations and the nature of business, which the
company and its subsidiaries are engaged in or propose to engage.
- The names, addresses, descriptions and occupations of the signatories to the
memorandum and the number of shares subscribed for by them.
- The number and classes of shares, if any, and the nature and extent of the interest of
the holders in the property and profits of the company.
- The number of redeemable preference shares intended to be issued, with the date of
redemption.
- Ownership of the Company’s Securities- The name and address of any person who
owns, beneficially or of record, 5% or more of the securities of the company, indicating
the amount of securities owned, whether they are owned beneficially or of record, and
the percentage of the securities represented by such ownership
- The numbers of shares of the company’s securities owned by each of the top three
officers, each directors and all officers as a group, indicating the percentage of
outstanding shares represented by the shares owned.
- The issuer’s management-
-
- The names, address, descriptions and occupations of the directors or proposed
directors, the Managing Directors or proposed Managing Directors, the Managing
Agent or proposed Managing Agent, and the Manager or proposed Manager, if any.
- The names of all the companies in which the above persons is a director, managing
director or managing agent or manager and where any such person is a firm or a body
corporate, the said parti culars shall also be given in respect of every partner of the firm
or in respect of every director of the body corporate.
- Any provision in the article of the company or in any contract which has been entered
into as the appointment of a managing director, managing agent or manager, the
remuneration payable to him or them and the compensation, is any payable to him or
them for loss of office.
- Full particulars of the nature and extent of the interest, if any, of every director or
promoter in the promotion of the company; or in any property acquired by the
company within two years of the date of the prospectus or proposed to be acquired by
it.
- Any provision of the articles of the company which impose any restriction upon the
- directors in respect of their power of management, the nature and extent of those
restrictions.
- Names and ages of all officers of the company, the length of their service, position
- and office that each officer holds, business experience and the name of another
company of which he/she is currently employed.
-
- Any family relationships among directors, officers and nominees.
-
- Involvement of officers, directors in certain legal proceeding during the last ten years.
-
- Any Option held by the three top officers, each director and all other officers, as a
- Group
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- Lock-in on sponsors’ capital – The sponsors’ (founders) share capital shall be
“locked-in” of three years from the date of publication of prospectus or commercial
operation, whichever comes later.
- Lock in on private placement
- Private placement of shares shall be subject to a Lock-in for one year (excepting
mutual fund) from the date of consent for issuance of prospectus by SEC. Shares in
private placement if they fall under the category of sponsor shares shall be locked-in
for 3 (three) years.
- Risk Factors
- All risk factor like industry risk, currency risk, market & technology –related risks etc
shall be clearly stated in the prospectus.
- Use of Proceeds
- Depending on the business of the company, the prospectus shall indicate how the net
proceeds of the offering shall be used for each purpose.
-
- Description of Business
- The principal product or services of the company and the market for such products or
services.
- The amount and nature of inner –group transactions and holdings.
- How the products and services are distributed.
- Competitive condition in the business
- Sources and availability of raw materials and the name of the principal suppliers,
customers who purchase 10% or more of the company’s product
- Number of total employees and numbers of full-time employees.
- Description of property owned by the company or taken on lease.
- Plan of Operation
- If the company had no revenues from operation in each of the last two years, the
company’s plan of operations for the next twelve months shall be described in the
prospectus.
-
- Discussion of financial condition
- If the company had revenues from operation in each of the last two years, the
company’s financial condition, and results of operations for each of the last two years
shall be given in the prospectus.
4. Financial information:
In particular what financial information is required to be published by an IPO company/ initial
listing applicant? What accounting standards are required to be adhered to by reporting
accountants/ auditors? Is there an explicit working capital requirement at the IPO/ initial listing
stage?
The financial statement and an audited report by an Auditor for the last five years requires to
be published. If the company has been in existence for less than 5 years then above
mentioned submission will have to be made for the period of existence of the company.
5. Forward-looking information:
Is the inclusion of forward-looking information in offering documents permitted? If so, how is
this presented e.g. are there requirements for a forecast to be reported upon.
Inclusion of forward-looking information in the prospectus is not permitted.
6. Pro forma financial information:
Is the use of pro forma financial information permitted in offering documents?
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No
7. IPO/ initial listing approval:
What methods of assessment are used by the exchange and regulatory authority for the
approval of IPO’s and initial listings e.g. do the authorities pre-vet documentation, or is filing
sufficient?
The Exchange and the Commission vet the prospectus before giving the consent to IPO and
initial listing.
8. Regulation of the marketing of securities:
What approach is taken to the regulation of marketing securities? For example are research
analysts reports used for this purpose? Are “roadshows” used to encourage investor interest
in an IPO?
“Roadshows” are not used. There are no restrictions, but marketing practices are limited by
newspaper advertisements and personal contacts of the underwriters and the brokers.
Brokers get 1% “seal commission” as an incentive.
9.CONTINUING OBLIGATIONS OF LISTING – DISCLOSURE REQUIREMENTS
1. Provide a summary of the main types of continuing disclosure requirements under the
following categories:
- Disclosure of “price sensitive” information
-
- A price sensitive information requires to be disclosed to the Exchange within 30
minutes of the completion of the Board Meeting. The following information include as
“price sensitive information:
-
- Any recommendation of a final dividend
- Information showing the basis for declaration of an interim dividend
- Any recommendation or decision that a dividend will not be declared
- Any decision to change the Capital Structure of the company by way of a
- bonus or right shares
- Any intention to fix a book closing date and the reason thereof, stating the book
closing date.
- Any information relating to establishment of new unit of the Company
- Any change in the Board of Directors
- Any proposed basic change in the nature of business
- Disclosure of periodic financial information and the accounting standards are required
to be prepared to the financial statement requires to be audited within 120 days from
the date on which the financial years ends. A copy of such audited statement shall be
submitted to the Exchange within 14 days thereof;
- Half Yearly Financial Statement shall be transmitted to the Exchange, Shareholders,
within one month of close of the first half-year
- Specific prescribed disclosures of material information and actions on certain
transactions e.g. acquisitions, disposals and related transactions
- Acquisition, takeover, merger, restructuring, closure of business etc
- Disclosure of director’s and major shareholder’s dealings, and
- Every sponsor or director of a listed company shall file a report with the
- Exchange and with the SEC disclosing his intention to buy or sell or otherwise dispose
of securities in the company.
2. What mechanisms are used to ensure wide dissemination of information to the market,
investors and the public? For example are company announcements published in the
newspapers and/or on dealer- broker trading screens?
To ensure wide dissemination of information to the market, investors and the public the
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Exchange disseminates the information through their respective trading terminals immediately
after receiving thereof from the listed company.
Some information also requires to be disseminated through the newspapers by the issuers for
its shareholders after sending the news to the Exchange or the SEC.
10.CORPORATE GOVERNANCE PROVISIONS
What role does your listing regime play in the overall regulation of corporate
governance in your country?
- Corporate governance in Bangladesh is based upon the Companies Act, 1994, and
other rules and regulation of SEC and the Exchanges. Companies listed in CSE must
meet their respective listing and other requirement. In addition, listed companies must
comply with Bangladesh Accounting Standards and Bangladesh Standards on
Auditing, as adopted by the Institute of Chartered Accountant of Bangladesh.
- CSE as a regulatory body regularly monitor the company activities to ensure the
compliance of the above by the companies.
In particular provide a summary of the main types of requirements under the following
categories, cross-referring to other answers where the information has already been
provided:
Disclosure of “price sensitive” information
Please refer to 9.1
Enshrinement of certain shareholder rights
CSE monitor whether the listed company notify timely and orderly the news of any notice of
the Meeting and entitlement, or any decision related to the shareholders immediately. Any
shareholder whose such right is not violated by the company may make a complain to the
Exchange who may as a regulator take appropriate action against the company if not
complied with a stipulated time.
Takeovers regulation
In 2002 the SEC adopted Acquisition of Substantial Shares, Merger and Take-over Rules.
These rules, among other things, requires disclosure by persons holding 10% or more of a
listed public company, require persons who wish to acquire 10% or more to notify other
shareholders, and to publish their offer to purchase shares, the price to be determined by a for
mula related to the price of the shares for the last 6 months, o in certain cases, by negotiation.
The rules also have provisions relating to the takeover of financially weak companies.
Proscription of insider dealing
- No person shall either himself or through any other person deal in any insider trading
nor shall he give any personal advice or help in respect of such trading.
- Cancellation of license of a broker, dealer if the insider is broker/dealer
- The Exchange may direct the insider to take over the charge of the share or stock
acquired through insider-trading for a specified period or not to transfer the said
security for a specified period.
- Insider Trading is Punishable with imprisonment for a term which may extend to five
years or with fine which may extend too five lakh taka or with both.
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- Adoption of corporate governance codes.
- Adoption of codes regulating of directors dealings, and
- Disclosures and action on certain transactions.
- Every sponsor or director of a listed company shall file a report with the Exchange and
with the SEC disclosing his intention to buy or sell or otherwise dispose of securities in
the company.
11.COMPLIANCE MONITORING OF CONTINUING OBLIGATIONS AND
ENFORCEMENT
1. Summarise the compliance monitoring and enforcement mechanisms in your listing
regime?
- CSE Surveillance and Compliance Department monitor the issuers’ compliance
activities on regular basis.
2. In particular, provide details of the approach taken in the following categories:
monitoring the content and timing of disclosures by issuers of information at initial
listing and on an on-going basis
In case of violation of rules and regulation by the listed company CSE send a “show cause”
notice to the company with an order to comply the relevant clause. And if not complies within
stipulated time then take appropriate action which may be to impose fine, to warn, to suspend
or to de-list the company.
market surveillance, supervision and compliance monitoring of trading activities,
including review of pricing of orders
- The Exchange Compliance and Surveillance Department is primarily responsible for
day-to-day market surveillance, supervision and compliance monitoring of trading
activities, including review of pricing of orders.
- When unusual market action occurs it is reported to the Manager, Compliance and
Surveillance. In many cases by checking with Surveillance, the Manager will try to
trace the reason for the action to a specific cause such as recently disclosed
information, or rumours. Market surveillance may also check broker firms as to the
source and reason for activity stemming from their particular firms. If no explanation as
to the reason for the unusual activity is revealed the Exchange may make a query to
the Company to determine whether they know the cause of the action. It the action
appears to be attributable to a rumour or report or to material information that has not
been publicly disseminated, the Company is requested to take appropriate corrective
action and it may be advisable to halt trading until such action has been taken
monitoring the timely and orderly release of price-sensitive information
While monitoring the content and timing of disclosures by issuers of information at initial listing
and on an on-going basis CSE ‘s approach are as follows:
- (1) Immediate Public Disclosure of Material Information:
- A Listed Company is required to release material information to the public in a manner
designed to obtain its fullest possible public dissemination.
- Immediate disclosure should be made of information about a Company’s
- affairs or about events or conditions in the market for the Company’s Securities which
meets either of the following standards:
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- (a) Where the information is likely to have a significant effect on the price of any of the
Company’s Securities, or
- (b) Where such information (after any necessary interpretation by Securities analysts
or other experts) is likely to be considered important, by a reasonable investor in
determining his choice of action.
- (2) Through Public Dissemination:
- A Listed Company is required to release material information to the public in a manner
designed to obtain its fullest possible public dissemination.
- (3) Unwarranted Promotional Disclosure:
- A Listed Companies should refrain from promotional disclosure activity which exceeds
what is necessary to enable the public to make informed investment decisions. Such
activity includes inappropriately worded news release, public announcements not
justified by actual developments in a Company’s affairs, exaggerated reports or
predictions, flamboyant wording and other forms of overstated or over-zealous
disclosure activity which may mislead investors and cause unwarranted price
movements and activity in a Company’s Securities.
monitoring of the timing and content of quarterly review statements and half-yearly and
annual financial statements
- The Compliance and Surveillance Department monitor whether quarterly review
statements and half-yearly and annual financial statements are disseminated by the
listed companies to the Exchange and to the shareholders within the specified period
and also check the accuracy of such statement and report.
vetting of the initial suitability of applicant firms applying to act as Sponsors (i.e.
corporate advisers such as investment banks) and ongoing review of continuing
compliance with eligibility criteria
Not applicable. SEC regulates Merchant Banks.
monitoring of adherence of Sponsors to their ongoing duties to the Exchange and
instituting disciplinary proceedings against them, and
- SEC monitors the adherence by the Merchant Banker to their ongoing duties and also
institute disciplinary proceeding against them as the Merchant Bankers are registered
with the SEC.
investigating suspected market abuses and liaising with other regulatory agencies.
- CSE conduct investigation of suspected market abuses done by the broker/dealer and
refers the market abuse cases by the issuers to SEC for investigation and taking
necessary action.
3. Is suspension of listing or trading of a company’s securities used as a regulatory
device on your market.? If so, provide details of the situations where suspension takes
place.
Yes suspension of listing of a company’s securities used as a regulatory device on our
market. Grounds for suspension of listing of a company are:
- Fails to comply with the requirements of any of CSE listing regulations;
- Where the Exchange considers it necessary for the protection of investors;
- Fails to pay penalty or any other dues payable to the exchange for a period of two
years;
- Fails to hold its AGM for a continuous period of three years;
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- Gone into liquidation either voluntarily or under court order;
- Fails to pay the annual list fees for a period of 2 years;
- If securities are quoted below 50 per cent of face value for a continuous period of
three calendar years;
- Fails to declare dividend or bonus:
- for five years from the date of declaration of last dividend or bonus; or
- in the case of manufacturing companies, for five years from the date of; or
commencement on commercial production
- for five years from the date of commencement of business in all other cases.
Part 2 – Views on how the listing regime could be strengthened and improved
All SAFE member exchanges are asked to make a submission expressing their views on the
strengths, weakness, opportunities and threats of their current listing regime.
Provision of compulsory dual listing is necessary for a successful listing regime in
Bangladesh. As an applicant is not bound to list in both the exchanges, it is not possible for
the Exchange to regulate the companies strictly. The companies apply for de-list whenever an
exchange takes any regulatory action against them.
Competition between two exchanges becomes nearly impossible as both the exchanges have
the same rules and regulations. The Exchanges should be allowed to make different
regulation
If dual listing is not compulsory then enforcement of listing rules and regulation may be ensure
by the SEC alone and not by the Exchange
A requirement for an Audit Committee for the listed companies should be put in place.
Currently the Registrar of Companies has the authority to enforce the Companies Act, 1994.
The SEC should have authority to bring any action against listed companies and/or their
shareholders and directors for any alleged violation of the Companies Act, 1994.
There is no special court for cases involving securities law. Judges of the court is not
adequately expert on the securities law. A special bench of the High Court Division having
original jurisdiction of all cases involving alleged breached of the Companies Act, 1995 or the
laws on SEC.
Part 3 – Views on the scope for regional co-operation and harmonisation on
listing matters
All SAFE members are asked to make a submission expressing their views on the scope for
greater harmonisation of listing standards among SAFE Exchanges, including their
perspectives on the key implementation dependencies. Notes on the development of regional
markets are set out in Annex 6.
There are companies in Bangladesh who are willing to list cross-border Fin order to raise
larger amount of funds and to ensure wider liquidity. Similarly, we understand that there are
companies in other neighbouring countries having a similar desire. Fulfilment of this intention
will require, among others, a harmonized listing regime. There are other factors, e.g., foreign
currency convertibility etc. But SAFE can certainly work to compare and suggest a
harmonised listing regulation acceptable to all the regimes.
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SAFE: STRENGTHENING STOCK EXCHANGE LISTING REGIMES AND REGIONAL HARMONISATION PROJECT
Annex 2. 1: CSE – Bangladesh
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