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          The chief of the country's capital market watchdog body -- the Securities and Exchange Commission (SEC) -- has claimed at a recent regional seminar on capital market in Dhaka that things are now better than before in the stock market due to intense monitoring and supervision. Those who keep track of the developments in the bourses would endorse all the good words said by the SEC top brass about the stock market.
What is important is that the market is increasingly gaining maturity and depth. It seems that a good number of investors by now have learnt to apply their sixth sense--- when and where to stop and restart--- so far as the price movements of the shares are concerned. They also now take into cognisance the asset value, reserve, annual dividend, price earning ratio etc., of listed issues while making investment choices. However, all these cautious approach and logic are found to have little effect when market goes truly berserk as it happened in the year 1996.
These days, bad shares--- the number of which is substantial--- are not at all picked up by the investors and the prices of good shares are, in most cases, have reached the upper limit. That is why the share price index is behaving in a set pattern--- if three points up today, two points down tomorrow. The market has a strong appetite for good shares. But only a few of the new issues floated recently have the potentials to emerge as companies with strong fundamentals.
In the backdrop a dismal situation so far as supply of good shares is concerned, the SEC chief has recently disclosed some good news. He told the FE the other day that steps were underway to bring the profit-earning state-owned enterprises (SoEs) and big and strong private limited companies to the stock market. The disclosure was followed by yet another good news--- the Tata Group of India, if its investment plans are finally implemented, would float shares of its proposed steel, fertiliser and power plants for public subscription.
However, all these encouraging developments do not have any meaning for some hapless investors who actually did not burn their fingers in 1996 share scam. These investors were smart enough to invest in primary shares of a large number of companies from time to time. But these shares are now nothing more than worthless papers. Some are not even traded in the bourses and some are priced even at 20 per cent of their face value.
Those who bought shares at abnormally high prices in 1996 might have reasons for cursing themselves for making rash and ignorant investment choices. But those who bought primary shares after going through all the rosy pictures portrayed in the prospectuses and lost their investments in the process have no reasons to blame themselves. If anyone is to blame for the folly, it is the SEC, which approves the initial primary offerings (IPOs). As the regulator it is the responsibility of the SEC to verify the statements, financial or otherwise, of the companies willing to go public. Such verification does require on-the-spot visits by the SEC officials. But there are reasons to doubt whether the regulator does its job with honesty and sincerity on this score.
Investors have virtually given up hope to retrieve their funds out of primary shares of companies like Excelsior Shoes, Mark BD Engineering, Wonderland Toys, Gauchihata, BD Auto Cars, BEMCO, Shympur Sugar Mill, Sreepur Textiles, Meghna Vegetable Oil, Meghna Pet, Meghna Condensed Milk, Saleh carpet, Sonali Paper, Maq Paper, Maq Enterprise, Modern Cement, Padma Cement and Padma Printers. There are many more listed issues that, for the investors, exist only in name. Not that the crooked sponsors of these companies took advantage of the 1996 stock boom situation to cheat the investors. They have repeated the same practice even recently in the absence of proper care and check by the SEC.
The SEC has to compensate for its lapses, so far as the primary issues are concerned. It has to devise ways to compel the sponsors of the delinquent companies to refund the investors' fund. But how is it possible?
The banks have shown the way. Having adequate legal backing, banks can now directly foreclose the assets of the delinquent borrowers. For foreclosure, they do not have to go to the courts. Besides, the Money Loan Court Act of 2003 has proved to be an effective piece of legislation to force delinquent borrowers to pay their overdue loans to banks and financial institutions. The SEC needs to actively consider some tough measures to help the aggrieved investors, at least through the payment of a part of their investments in primary shares. If delinquent borrowers are made to repay loans to banks, why should not the dishonest sponsors refund money to the investors?