6 merchant banks face licence cancellation over capital deficiency, inactivity

The move was triggered by preliminary findings that some of the institutions had long failed to meet minimum capital requirements, while the others faced accusations of persistent regulatory non-compliance and prolonged operational inactivity

6 merchant banks face licence cancellation over capital deficiency, inactivity

In a major regulatory crackdown, the stock market watchdog has initiated the process of cancelling the licences of six more merchant banks over allegations of prolonged inactivity and capital deficiency.

The move was triggered by preliminary findings that some of the institutions had long failed to meet minimum capital requirements, while the others faced accusations of persistent regulatory non-compliance and prolonged operational inactivity.

The merchant banks facing licence cancellation are FAS Capital Management, Imperial Capital, NDB Capital, Riverstone Capital, HAL Capital and Roots Investment.

"Our preliminary investigation uncovered serious irregularities," said Md. Abul Kalam, executive director and spokesperson of the Bangladesh Securities and Exchange Commission (BSEC).

The commission has now ordered detailed, case-by-case investigations into the operational and financial conditions of the merchant banks before taking a final decision. The affected merchant banks will also be given an opportunity to explain their positions and defend themselves as part of the regulatory process.

Officials said investigators would examine why the firms had failed to restore their capital positions despite repeated regulatory warnings and whether there were any governance failures, negligence or violations of securities laws.

Under the Securities and Exchange Commission (Merchant Banker and Portfolio Manager) Rules, 1996, a full-fledged merchant bank must maintain a minimum paid-up capital of Tk 250 million. In addition, its continuous net assets must not fall below 50 per cent of the paid-up capital to ensure financial soundness and investor protection.

The commission also ordered separate investigations into UniCap Investments and GSP Investments over their failure to maintain the required net capital. At the same time, BRAC EPL Investments has been asked to explain why its net capital fell below the regulatory threshold.

The Market Intelligence and Investigation Division has been directed to conduct comprehensive investigations into UniCap Investments and GSP Investments, focusing on the reasons behind their capital erosion, their overall financial health, compliance with securities laws and any governance lapses.

"If investigators find evidence of irregularities, negligence or violations of securities laws, legal action will be taken against those responsible," Mr Kalam said.

The latest move is one of the toughest enforcement actions against merchant banks in recent years, reflecting the new BSEC commission's determination to strengthen market discipline, improve governance and ensure that licensed intermediaries remain financially capable of protecting investors' interests.