Investment abroad needs BSEC ‘Nods’

Summary: 

Bangladesh Securities Zone and Exchange Commission has intervened in the parallel drafting rules by Bangladesh Bank and Bangladesh Investment Development Authority on a debatable consent by the offshore investors, albeit with some exceptions to the capital issue.

Content: 

Equity investments are commonly used in our country. When money is invested in a company by purchasing shares of that company in the stock market, then its’ called an equity investment. These shares are typically traded on a stock exchange. For example, direct equity investments like stocks or mutual fund investments are examples of market-linked investments whereas fixed deposits or post office time deposits are popular fixed return investment products.

Recently, a notification has been published by Bangladesh Securities and Exchange Commission which says, local businesses willing to make equity investment abroad will have to take their consent. One can invest in those mutual funds/ETFs to indirectly invest in foreign equities. This is the easiest approach to invest in foreign stocks. An advantage of investing through mutual funds is that one won’t need to open any overseas trading account and even to invest a hefty amount.

The officials of the BSEC say, they also have the authority although the central bank and the investment regulator are developing separate guidelines on equity investments abroad. A Commissioner, Dr. Shaikh Samsuddin Ahmed said, “The issue of capital can be executed in the form of cash, debenture or bond. A company must take consent of the BSEC if the equity investments have any relation to the ‘issue of capital’.

The term ‘issue of capital’ means the issuing of any securities whether cash or otherwise, the ordinance defines. As per subsection(1) of s.2A of the Securities and Exchange Ordinance 1969, no issuer, or no company incorporated in Bangladesh, except with the consent of the commission, can make an issue of capital outside Bangladesh. “ The commission may, on an application made to it, make an order according to recognition to an issue of capital made or to be made outside Bangladesh.” According to the BSEC ordinance.

To a question whether the companies which have already made investments abroad received the BSEC consent, they replied in negative.

However, both BIDA and Bangladesh Bank have reached at the final stage of drafting the rules of equity investments to be made abroad by the local businesses. Apparently with the speech of the executive chairman Md. Sirazul Islam, it is clear that the existing laws can not be overwritten by BSEC with the rules which are already in pipeline.

However, BSEC has cleared the anonymity of the rules. The Commissioner said, “The consent of the securities regulator is not required for equity investment until shares are issued against the money deposited by a company”.

He also added that “Approval is not required from any regulator if a company makes overseas investment submitting detailed information to the central bank”.

Chief Financial Officer of Square Pharmaceuticals Mohammad Zahangir Alam said, “ Square Pharmaceuticals has not raised capital from anyone issuing shares. In that case BSEC’s consent is not mandatory as our company made an investment in its fully owned subsidiary company.” Although they took approval from the shareholders’ at an annual general meeting.

Source: The financial Express

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