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IPO approval needs overhaul, says CSE

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Chairman of Chittagong Stock Exchange Dr Muhammad Abdul Mazid addressing a press conference Monday. — FE Photo

The port city bourse has said that the IPO (initial public offering) proposals should be approved based on companies’ merits rather than “embellished” paper-based disclosures.

“The approval (IPO) process should be overhauled to help select companies based on solid fundamentals,” chairman of the Chittagong Stock Exchange Dr Muhammad Abdul Mazid said.

Mr. Mazid, also a former chairman of the National Board of Revenue (NBR), said paper based disclosures shouldn’t be only criterion while allowing companies to go public. “There should be a rigorous scrutiny process before an IPO is endorsed by the regulator. Investors and market would be benefited if the IPO proposals were screened considering the merits,” he said.

His comments came Monday at a press briefing held at the CSE’s Dhaka office.

Four CSE directors–Mohammed Mohiuddin, Dr. Moinul Islam Mahmud, Prof. Mamtaz Uddin Ahmed and Nasir Uddin Chowdhury– and the CSE Managing Director Syed Sajid Husain also attended the press briefing held to discuss the current market scenario.

The CSE chairman said the IPO proposals get regulatory approval on the basis of quality of a company in other countries such as China.

“Similar IPO approval process should be introduced in our country along with bringing changes in the process of giving listing,” he said.

At the press briefing, the CSE director Mohammed Mohiuddin said the port city

bourse has started the job of visiting the companies which have submitted the IPO proposals to go public.

“We have also asked the companies to make presentation on their fundamentals. Following our proposal, some companies withdrew their proposals,” Mr. Mohiuddin said while responding to a question whether the exchanges play due role in ensuring the companies’ due diligence.

Mr. Mazid has also made a presentation on the objectives of demutualised exchange and the impacts of recent regulatory decisions on the capital market.

“Our capital markets are fully based on institutional investors. Subsequently, the actual market movement cannot be understood unless the institutional investors become active,” he said.

The CSE chief has appreciated the securities regulator for suspending the activities of an issue manager for the first time as a punitive action against submitting fake information of a company seeking regulatory approval.

He said the Bangladesh Bank’s recent directive on the submission of investment related information by the banks on the daily basis has also worked as a catalyst behind the poor turnover of the capital market.

“The central bank last week also asked the financial institutions to lower single borrower’s exposure limit. As a result, the investments of the financial institutions will also be reduced in the capital market,” Mr. Mazid said.

He stressed the need for introduction of new products in the capital market along with enhancing investors’ knowledge by arranging training and workshops.

“We’re working to launch IPO Index, Shariah Index and Benchmark Index. These indices will be launched soon after we get approval from the regulator,” the CSE chief added.

After holding the press briefing, the CSE board Monday also called on the policy makers of the Bangladesh Securities and Exchange Commission (BSEC) and discussed some issues including the way of bringing positive changes in IPO approval process.

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Source: Financial Express

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