BSEC Authorized Representative cheat sheet
BSEC Authorized Representative · Keep the key ideas within reach.
Securities Laws, Rules and Regulations Administered by BSEC
BSEC is the statutory regulator of Bangladesh's capital market, constituted under the Securities and Exchange Commission Act, 1993, with quasi-judicial and rule-making powers.
Core statutes: Securities and Exchange Ordinance, 1969; Securities and Exchange Commission Act, 1993; Depository Act, 1999; Bangladesh Securities and Exchange Commission (Alternative Investment) Rules, 2015.
Subsidiary instruments include the Public Issue Rules, 2015; Risk-Based Capital Adequacy Rules for intermediaries; Margin Rules; and the Short Sale Rules, 2024.
BSEC issues directions under section 20A of the 1969 Ordinance; non-compliance triggers enforcement under section 25 (penalties, suspension, cancellation of registration).
Regulation-making follows statutory consultation and gazette notification; rules bind all registered persons, issuers, and exchanges.
The Commission may exempt, relax, or impose conditions on compliance by written order; exemptions are fact-specific and do not create precedent.
BSEC supervises both stock exchanges (DSE, CSE) and CCHB; exchanges are demutualised under the Demutualisation Act, 2013.
Insider trading, market manipulation, and fraudulent inducement are prohibited under sections 17-18 of the 1969 Ordinance, enforced by BSEC investigation and sanctions.
Registration and Conduct of Market Intermediaries and Authorized Representatives
Registration categories include stock dealer, stock broker, portfolio manager, merchant banker, underwriter, issue manager, asset manager, and depository participant.
Authorized representatives act for a registered intermediary; their approval, conduct standards, and termination are governed by BSEC intermediary regulations and exchange rules.
Minimum capital, net worth, and risk-based capital adequacy thresholds apply per category; shortfalls can trigger suspension or cancellation.
Intermediaries must maintain records, segregate client assets, avoid conflicts, and file periodic returns with BSEC and the exchange.
Fit-and-proper criteria apply to directors, sponsors, and authorized representatives: no conviction for fraud, no disqualification, and demonstrated competence.
Code of conduct: fair dealing, best execution, suitability, confidentiality, disclosure of conflicts, and prohibition on front-running or churning.
Registration renewal, change of control, and material changes require prior BSEC approval; unapproved changes void registration protection.
Disciplinary actions include warning, fine, suspension, cancellation, and referral for prosecution; exchanges also discipline members under their own rules.
Issue of Securities: Equity, Debt, Fund, and Sukuk
Public equity issue via IPO requires BSEC approval under the Public Issue Rules, 2015; eligibility includes minimum paid-up capital, track record, and free-float requirements.
Book-building and fixed-price methods are permitted; disclosure via prospectus must include risk factors, use of proceeds, and audited financials.
Rights issues, bonus issues, and preferential allotments require separate BSEC approvals and shareholder authorisation.
Debt securities (bonds, debentures) require disclosure on coupon, security, covenants, and trustee appointment; listed debt must meet minimum issue size and credit rating.
Mutual funds are launched under the Mutual Fund Rules; asset managers must file scheme documents, appoint trustees and custodians, and meet minimum subscription.
Sukuk are issued under BSEC's Sukuk Rules; structures must be Shariah-compliant (ijarah, mudarabah, musharakah, wakalah) and certified by a Shariah advisor.
Private placements and qualified investor offerings have reduced disclosure but still require BSEC notification and investor-eligibility verification.
Post-issue obligations: use of proceeds reporting, continuous disclosure, and compliance with listing regulations on both exchanges.
Investor Protection, Enforcement Actions, and Market Conduct Compliance
Investor protection tools include prospectus liability, compensation funds, investor complaints cell, and mandatory risk disclosure.
BSEC enforcement powers include investigation, search and seizure, disgorgement, fines, suspension of trading, and referral to the Anti-Corruption Commission or courts.
Market conduct prohibitions cover insider trading, price manipulation, wash trades, spoofing, front-running, and misleading disclosure.
Surveillance systems at exchanges detect abnormal price/volume patterns; BSEC can order trading halts or special audits.
Whistleblower and complaint channels require intermediaries to maintain grievance redressal and report material incidents to BSEC.
Dispute resolution: investor complaints can be escalated to BSEC; civil remedies exist through courts and arbitration clauses in client agreements.
Sanctions are graded: warning, fine, suspension, cancellation, disgorgement, and criminal prosecution for fraud or unlicensed activity.
Compliance programs at intermediaries must include AML/CFT controls, KYC, record retention, and periodic internal audits reported to BSEC.
Market Conduct and Enforcement: Cross-Cutting Compliance
Continuous disclosure obligations require issuers to promptly report material events, price-sensitive information, and changes in capital structure.
Related-party transactions require disclosure, independent valuation where material, and shareholder approval above thresholds.
Takeover and acquisition rules require mandatory offers above prescribed shareholding thresholds and equal treatment of shareholders.
Short selling, margin trading, and derivatives are permitted only under specific BSEC rules with position limits and reporting.
Record-keeping: intermediaries must retain client and transaction records for the statutory period and produce them on BSEC demand.
AML/CFT compliance includes customer due diligence, suspicious transaction reporting to BFIU, and sanctions screening.
Enforcement procedure: show-cause notice, hearing, reasoned order, and appeal to the appellate tribunal or High Court Division.
Cross-border cooperation: BSEC shares information with foreign regulators under IOSCO MMoU for cross-border enforcement.
Registration and Conduct: Authorized Representative Duties
Authorized representatives must act within the scope of their intermediary's registration and cannot transact outside approved activities.
Suitability duty: assess client risk profile, investment objective, and capacity before recommending securities.
Disclosure duty: explain fees, conflicts, risks, and product features in writing before executing orders.
Prohibition on guaranteed returns, misrepresentation, unauthorized trading, and commingling of client funds with firm assets.
Order handling: timely execution, fair allocation, best execution, and record of order instructions with timestamps.
Continuing education and periodic competency assessment are conditions for maintaining authorized representative status.
Supervisory responsibility: representatives must escalate suspicious client activity and cooperate with BSEC inspections.
Termination or resignation must be reported to BSEC and the exchange; pending client obligations survive termination.
Issue of Securities: Procedural and Disclosure Requirements
IPO application to BSEC includes prospectus, due diligence certificate from issue manager, auditor's certificate, and legal opinion.
Public issue timeline: BSEC consent, publication of prospectus, subscription period, allotment, listing application, and trading commencement.
Minimum subscription thresholds and refund obligations apply if the issue is undersubscribed.
Greenshoe and over-allotment options are permitted within limits set by Public Issue Rules.
Continuous disclosure post-listing: quarterly and annual financials, price-sensitive events, and shareholding pattern changes.
Sukuk issuance requires asset backing, bankruptcy remoteness, Shariah certification, and periodic investor reporting.
Mutual fund schemes require trustee approval, custodian appointment, and BSEC registration before marketing.
Debt issuers must maintain a debenture trustee and comply with covenant reporting to holders.
Investor Protection and Enforcement: Practical Compliance
Investor compensation schemes cover specified defaults; claims require proof of loss and timely filing.
BSEC's complaint management system tracks resolution timelines; unresolved complaints escalate to enforcement.
Fraud indicators: unusual returns, unregistered schemes, pressure selling, and off-market transfers.
Intermediaries must segregate client securities in the depository and maintain reconciliation statements.
Insider trading enforcement relies on trading records, communication logs, and timing analysis around disclosures.
Penalties under the 1969 Ordinance include fines and imprisonment; BSEC may also order disgorgement of profits.
Market conduct reviews assess order-to-trade ratios, client concentration, and complaint patterns.
Cooperation with BSEC investigations is mandatory; obstruction is itself a sanctionable offence.