Shareholders of the Dhaka Stock Exchange (DSE) have raised concerns regarding the recent appointment of two independent directors by the Bangladesh Securities and Exchange Commission (BSEC), suggesting that the appointments may not adhere to the established regulatory framework.
The controversy emerged after the BSEC appointed seven independent directors to the DSE board on 2 September, allegedly bypassing candidates proposed by the shareholders. The appointments of KAM Majedur Rahman, a former managing director of the DSE, and Nahid Hossain, an additional secretary in the financial institutions division of the Ministry of Finance, have been particularly questioned.
A group of shareholders cited the Dhaka Stock Exchange (Board and Administration) Regulations 2013, which stipulate that an individual cannot serve as an independent director if they have had a business relationship with the stock exchange—whether directly or indirectly—as a partner, substantial shareholder, or director of an entity with such a relationship within the past three years. Additionally, the regulations disqualify anyone associated with TREC holders, shareholders of the stock exchange, or its directors, or anyone who has been an employee of a regulatory body.
The shareholders highlighted that KAM Majedur Rahman served as a director at AK Khan Securities from December 2020 to 4 October 2022 and is currently the CEO of AK Khan and Company Ltd, the parent company of AK Khan Securities. They also pointed out that Nahid Hossain’s role as an additional secretary in the financial institutions division, a government entity with regulatory functions, should disqualify him from being considered an independent director.
In response, the BSEC clarified that Majedur Rahman was a nominated director at AK Khan Securities, which exempts him from the restrictions outlined in the regulations. The commission also argued that the financial institutions division does not function as a regulatory body, thus preserving Nahid Hossain’s eligibility for the position.
BSEC Director and spokesperson Farhana Faruqui emphasized to the media that the appointments were made in accordance with existing rules and regulations, asserting that there is no conflict of interest in these cases.
The BSEC further explained in a statement that it typically approves the list of independent directors recommended by the DSE’s Nomination and Remuneration Committee (NRC). However, the NRC is currently non-operational due to the resignation of all its independent directors, necessitating the BSEC’s direct involvement in the appointments.
Saiful Islam, president of the DSE Brokers Association (DBA), commented on the situation, stating, “We are not legal experts, so we cannot provide a legal interpretation. However, if there are allegations of a legal dispute regarding someone’s appointment, the BSEC must provide a legal explanation on the matter. If that’s not possible, then an alternative measure must be taken to maintain market confidence.”
He added, “To uphold market confidence, we want to remain above any controversy. No party should take any steps that could undermine trust.”
In a letter to the finance adviser on Sunday, the DBA called for reforms in the Stock Exchange Demutualization Scheme, which was enacted a decade ago. DSE shareholders believe they should have an equal voice on the bourse’s board.
The demutualized DSE board comprises 13 seats: four for shareholder directors, one for the strategic investor, one for the managing director, and seven for independent directors, who are typically recommended by the DSE NRC and approved by the BSEC.
