"Small investors are the heart of capital market. They should get priority in the initial public offering (IPO) while private placement should be discouraged," he said yesterday in an interview with The Daily Star.

SEC is going to discontinue the slab system in IPO distribution which will ensure that every individual applicant get at least one lot and if oversubscribed the remaining IPOs will be distributed through lottery, said Islam who took over as the chief of the capital market watchdog on Saturday.

Discontinuation of slab system alone will not bring remedy to problem-infested capital market as its performance depends on many other things. "SEC has to be meticulous in its screening, monitoring and enforcement activities," he said.

Commenting on the long list of low performing Z-category companies, he said before allowing a company to float IPO its management quality, track record, economic health and viability of expansion plan should be scrutinised scrupulously.

"Relaxation in such scrutiny leaves scope for fake companies to enter capital market", said Dr Islam, who served 13 years as a director in Economic and Social Commission for Asia and the Pacific (ESCAP).

"Issuers, investors, auditors need self-regulation before going to capital market to ward off malpractice," he said assuring all of leaving no stone unturned to bring back investors' confidence on capital market.

"Nobody will be allowed to use capital market for raking in money by cheating general people," said Islam, a retired additional secretary.

SEC has to improve its monitoring capacity in examining account statements of companies and overseeing regular holding of annual general meeting, declaring and disbursement of dividend, he said.

Islam said speedy trial tribunal can be set up for quick disposal of share market cases. "As we have to depend on judicial system to take legal action against law-breakers the system needs to be sped up to quickly hand over punishment."

He suggested amendment to the Companies Act for better performance of capital market. "We are now working on a proposal to be sent to commerce ministry for amendment to the act," he said.

Islam said SEC needs proper coordination with finance ministry, Bangladesh Bank and other offices concerned to overcome challenges and improve performance.

About central depository system, he said the electronic share trading system would bring an end to transaction of fake shares and debentures.

Comparing with bourses of neighbouring countries, he said performance of Bangladesh bourse is worse in the region. He attributed it to low scale investment and want of professionally-managed companies.

Mirza Azizul Islam is the fifth SEC chairman since its inception in 1993. His predecessors are Sultanuzzaman Khan, Harun-ur-Rashid, MA Syed and Manir Uddin Ahmed.

Islam's appointment was made on contractual basis, which will be effective up to February 22, 2006.