Published: Tuesday, April 30, 2013

Demutualisation bill passed in parliament

Parliament yesterday passed a bill that separates bourses’ management from ownership with a promise to bring transparency in the stockmarket.
Finance Minister AMA Muhith placed the bill, Demutualisation Act 2013, which got passage through a voice vote.
The law will help develop and better regulate the capital market, and protect investors’ interests, establishing sound corporate governance in the bourses, according to the law.
Stock exchange members or brokerage houses will hold 40 percent shares after the demutualisation of a bourse.
The rest 60 percent will be kept for trading right entitlement certificate (TREC) holders, strategic investors and individuals.
Strategic investors will not be allowed to hold more than 25 percent shares of a stock exchange, while no individual will hold more than 5 percent.
The stock exchanges will submit a demutualisation scheme to the Bangladesh Securities and Exchange Commission within 90 days, and the regulator will approve it within the next 60 days.
After the stockmarket debacle in 2011, a probe committee recommended demutualisation of the bourses, a process which would transform the entities currently owned mainly by stockbrokers into public companies to be owned by shareholders.The demutualisation of a stock exchange transforms it into a for-profit company owned by shareholders. It also ensures alternative business models and operational efficiency.
A demutualised bourse can also freely trade on the market like any other public company.
Bangladesh’s stock exchanges are now non-profit cooperative organisations, owned by the exchange members who are usually stockbrokers.