Sec Project FiSnal

8/12/2019 Sec Project FiSnal

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BUS 251(Business Communication)

Role of SEC in the economy of Bangladesh

Prepared for:

Mahood Hasan (MOH)

Faculty member, School of business

North South University

Prepared by:

Hossain Al Imran 1130395030

Md Inzamul Haque 1130033030

Md Shajjadul Islam 1130017030

Nafia Tabassum 1030407530

Syed Sadman Amin 1030690530



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Executive summary

Securities and Exchange Commission (SEC) was established on 8 June 1993 through enactment

of the Securities and Exchange Commission Act, 1993. The objectives of the SEC are to develop

the securities markets and to frame necessary rules and regulations of capital markets and issues

and dealings in securities with a view to provide for protection of investors. After establishment,

the Commission has played significant role in the overall development of the capital market and

legal infrastructure in the capital market, introduction of automated trading system for securities

transaction, deposit and transfer of securities electronically through establishment of Central

Depository Bangladesh Limited, opportunity of getting real time market price of securities and

index information, etc. Consequently, investors have been ensured to invest in the capital market

with confidence, and similarly entrepreneurs of different industries have picked the capital

market as the main source of long-term financing. The project contains details about the two

capital market of Bangladesh, their mechanism as well as the importance of SEC in the economy

of Bangladesh.

In this project we related SEC in our economy indirectly as the regulating body of the capital

market of Bangladesh which actually plays a direct role on the economy.



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C O N T E N T S

INSIDE PAGE

1 Introduction 03

2 Bangladesh capital market 04

3 Mechanism of capital market in Bangladesh 06

4 Effect of capital market in the economy of Bangladesh 10

5 Importance of and efficient SEC in the economy 13

6 Conclusion 18

7 References 18



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1. Introduction:

The Bangladesh Securities and Exchange Commission (BSEC) was established on 8th June,

1993. Earlier its name was Securities and Exchange Commission. Through an amendment of the

Securities and Exchange Commission Act, 1993, on 10 December 2012, its name has been

changed as Bangladesh Securities and Exchange Commission. The Chairman and

Commissioners of the Commission are appointed by the government and have overall

responsibility to formulate securities legislation and administer as well.. The Commission is a

statutory body and attached to the Ministry of Finance. Security and exchange commission is the

official regulatory body of capital market of Bangladesh which plays a vital role in the economy.

So, if there is something wrong in capital market it will directly affect the economy which makes

SEC responsible. Distinctly, we can understand that SEC plays an indirect but significant role in

the economy of Bangladesh.

Mission of the SEC is to:

* Protect the interests of securities investors.

* Develop and maintain fair, transparent and efficient securities markets.

* Ensure proper issuance of securities and compliance with securities laws.

* Members perform the following functions:

* Serve as the members of the Commission and supervise its management.

* Provide policy direction to industry and staff and promulgate legally binding rules.

* Act as an administrative tribunal for decisions on the capital market.



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The Commission's main functions are:

1. Regulating the business of the Stock Exchanges or any other securities market.

2. Registering and regulating the business of stock-brokers, sub-brokers, share transfer agents,

merchant bankers and managers of issues, trustee of trust deeds, registrar of an issue,

underwriters, portfolio managers, investment advisers and other intermediaries in the securities

market.

3. Registering, monitoring and regulating of collective investment scheme including all forms of

mutual funds.

4. Monitoring and regulating all authorized self-regulatory organizations in the securities market.

5. Prohibiting fraudulent and unfair trade practices relating to securities trading in any securities

market.

6. Promoting investors' education and providing training for intermediaries of the securities

market.

7. Prohibiting insider trading in securities.

8. Regulating the substantial acquisition of shares and take-over of companies.

9. Undertaking investigation and inspection, inquiries and audit of any issuer or dealer of

securities, the Stock Exchanges and intermediaries and any self-regulatory organization in the

securities market.

10. Conducting research and publishing information.

2. Bangladesh Capital Market:

Capital market plays a significant role in the economy as a source of long term financing. A fair,

efficient and transparent capital market is essential for a country for its industrialization and

economic development. To develop such a fair, efficient and transparent capital market, the



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Securities and Exchange Commission was established as a regulator through enactment of the

Securities and Exchange Commission Act, 1993 in June 1993, with the following

missions:

•Protecting the interest of investors in securities;

•Developing the capital and securities markets; and

•Framing of securities rules concerning above.

The Commission frames rules and regulations under the relevant laws ensure control of the

capital market through compliance of duties and responsibilities of the issuer, stock exchange

and market intermediaries.

The Commission consists of a chairman and four full time members who are appointed by the

government for a period of three years as per law, and terms of their service is determined by the

government. The Chairman is the chief executive officer of the Commission.

The Dhaka Stock Exchange (DSE):

Dhaka Stock Exchange Ltd (DSE) is the oldest and largest stock exchange in Bangladesh.

Though DSE was established in 28 April 1954 but its commercial operation started in 1956. The

board of directors consisting of 24 members directs the activities of DSE. Out of them,

12 directors are elected by direct votes of DSE members and other 12 directors are nominated

by the elected members from non-DSE members upon approval of the Commission. At

present, there are 238 members in DSE of which 22 members are registered by the



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Commission for conducting securities business. DSE has expanded its on-line trading

network to many district towns like Gazipur, Narayanganj, Comilla, Feni, Habiganj,

Maulvibazar, Mymensingh, Chittagong, Khulna, Sylhet, Kushtia, Barisal, Rajshahi and

Bogra including the divisional towns.

As on 30 June 2011 total number of listings in DSE was 490 against which issued capital was

Tk. 80683.90 crore and the market capitalization was Tk. 285389.22 crore.

The Chittagong Stock Exchange (CSE):

The Chittagong Stock Exchange Ltd (CSE), the second stock exchange, was established in

1995. The board of directors consisting of 24 members directs the activities of CSE. Out of them,

12 directors are elected by direct votes of CSE members and other 12 directors are nominated

by the elected members from non-CSE members upon approval of the Commission.

Now there are 135 members in CSE of which 120 members are registered by the Commission for

conducting securities business.

As on June 30, 2011 total number of securities in CSE was 215 against which issued capital was

Tk. 20677.39 crore and market capitalization was Tk. 225978.00 crore.

3. Mechanism of Capital market:

The size of the world stock market or equity market is more than US$55 trillion and the total

derivatives market has been estimated at about $850 trillion at the end of December 2010, 12

times the size of the world economy. The enormous size of the value of stock market simply

justifies the economic magnitude and diversity of the stock market. The stock market has been

playing a very significant role in the economy of a country since the 12th century and has



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flourished the global economy in the 21st century. Virtually every developed, developing and

underdeveloped economy has stock markets handling billions of dollars, trading of stocks of

listed companies throughout every business day. The world's largest stock markets are in the

United States, United Kingdom, Japan, India, China, Germany, France, South Korea and the

Netherlands. The stock market is one of the most important sources for companies to raise

money as "share capital" from individuals and institutions. This allows businesses to be publicly

traded, or raise additional financial capital for balancing, modernizing, reconstruction or

expansion (BMRE) by selling shares of ownership of the company in a public market. This is an

attractive feature of investing in stocks, compared to other, less liquid investments such as real

estate. Some companies actively increase liquidity by trading in their own shares. A stock market

provides a central location for investors to come together to buy and sell shares in companies.

These transactions take place for listed companies that have to make public announcements of

profit, loss and revenue figures. The individuals who own shares of these companies are its

shareholders and they are entitled to a yearly dividend set by the company. The stock market has

two main segments - the primary market and the secondary market. New issues of shares in a

company, or initial public offerings (IPOs), are dealt with in the primary market, while existing

shares can be bought or sold in the secondary market. Most of the daily trading volume comes

from the secondary market. A stable stock market indicates healthy trading activity and strength

in the country's economy. Rising prices of stocks and other securities are indicators or predictors

to the level of economic growth. The performance of the stock market can also be seen as a

barometer of public sentiment, and conversely, the general perception of investors about the

economy can also influence the stock market significantly. A fall in stock prices indicates

pessimism among investors and an expectation of subdued industrial activity in the near future.

Any uncertainty in the country, like an impending change or deviation in the policy and strategy

of the government, central bank and other statutory bodies, political instability, can also subdue

prices in the stock market. In fact, the stock market is often considered the primary indicator of a

country's economic strength and development. Rising share prices, for instance, tend to be

associated with increased business investment and vice-versa. Share prices also affect the wealth

of households and their consumption. Therefore, central banks tend to keep an eye on the control

and behaviour of the stock market and, in general, on the smooth operation of financial system

functions. Financial stability is the ultimate aim of all central banks.



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The economy can benefit stupendously from a stock market that is properly regulated,

transparent, and allows investors to conveniently buy and sell stocks to earn returns. A stock

exchange market fulfills two primary purposes: (a) it encourages public participation in private

business ventures. Entrepreneurs with good business ideas can raise huge amounts of capital by

launching a public issue of the company's shares in the primary market; (b) through the stock

market investors get the opportunity to share the success of large institutions that have the

expertise to do well in their ventures. This is a universally acceptable unique and economically

viable system that paves the way for investing the idle money and small to medium size savings

of the mass people in the manufacturing or commercial companies; thus provides goods and

services and employment to the economy. The stock market allows companies to understand the

market sentiments accurately. Their future strategies and approach are often influenced by the

way their corporate activities are received by the public and reflected in their share prices. If

investors view a management decision favorably, then they will want to buy shares in the

company to take advantage of expected future success. This will push share prices up. Similarly,

the management can also draw conclusions from falling share prices and align policies

accordingly. Stock Exchanges act as the clearinghouse for each transaction, meaning that they

collect and deliver the shares, and guarantee payment to the seller of a security. This eliminates

the risk of an individual buyer or seller that the counterparty could default on the transaction. In

principle, the stock market accelerates economic development and growth by providing a boost

to domestic savings and increasing the quantity and the quality of investment. The stock market

encourages savings by providing individuals with an additional financial instrument. The better

savings mobilization may stimulate and increase the savings rate significantly and improve the

economy. Stock market provides an avenue for growing companies to raise capital at lower cost.

In addition, companies in countries with developed stock markets are less dependent on bank

financing, which can reduce the risk of a credit crunch and save financing cost to a great extent.

Stock market therefore positively and dynamically influences economic growth through

encouraging savings amongst the individuals and providing avenues for corporate financing.

With a liquid market, the initial investors do not lose access to their savings for the duration of

the investment project because they can easily and quickly sell their stake in the company.



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The stock market is supposed to ensure through the takeover mechanism that past investments

are also most efficiently used. Theoretically, the threat of takeover is expected to provide

management with an incentive to maximize firm value. The presumption is that, if management

does not maximize firm value, another economic agent may take control of the firm, replace

management and reap the gains from the more efficient firm. Thus, a free market in corporate

control, by providing financial discipline, is expected to provide the best guarantee of efficiency

in the use of assets. Similarly, the ability to effect changes in the management of listed

companies is expected to ensure that managerial resources are used efficiently.

Efficient stock markets may reduce the costs of information. They may do so through the

generation and dissemination of firm specific information that efficient stock prices reveal. Stock

markets are efficient if prices incorporate all available information. Reducing the costs of

acquiring information is expected to facilitate and improve the acquisition of information about

investment opportunities and thereby improves resource allocation. Stock prices determined in

exchanges and other publicly available information may help investor make better investment

decisions and thereby ensure better allocation of funds among companies and as a result a higher

rate of economic growth takes place. According to the IMF report on the stock markets in the

underdeveloped and developing countries in Africa and Asia, stock markets are getting setback

often due to the inefficiency, lack of knowledge and expertise in stock market operations. Stock

market provides capital flow in the economy thus increases investment opportunities and creates

employment opportunities, that is, it meets the top priorities of any government's strategy and

planning. Stock market of any country needs proactive supports from the government, statutory

bodies, central bank and stock trading houses. The government can support by its prudent and

efficient Fiscal Policy, the central bank can support by its monetary policy and others by taking

timely and corrective steps to improve the stock market. "Fiscal policy causes budget deficit,

which can lead to higher interest rates and the crowding out of private investment, which is

anathema to the stock market" said Professor Peter Navarro, PhD of University of California. He

further said "The fiscal and monetary policies of the government have an enormous impact on

stock prices because they affect economic growth and potential earnings."

In the perspective of Bangladesh, stock market plays a very significant role in the Bangladesh

economy like other developed and developing countries. Stock market of Bangladesh covered 33

per cent of Bangladesh's gross domestic products (GDP) in 2011, in term of derivative value of



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all listed stock stood at 50 per cent of GDP in December 2010. The coverage percentage of

Bangladesh stock market in GDP is increasingly significant and is much higher than that of

many other countries. Stock market is called a "Casio-market" by some quarters but from the

impact on the economy of any country, there is no scope and reason to justify their views. In the

21st century no country can afford to undermine and discourage stock market activities and not

to realize the importance of having strong and stable stock market. If any country does, it would

be an "economic suicidal act" killing and destroying the economy and its growth. Thus the stock

market of any country should be nourished, taken care and supported for its proliferation to

become a smart, fast-growing, politically and economically stable and culturally vibrant country.

The writer is the Group Financial Controller of a private group of industries.

4. Effect of stock market in the Economy of Bangladesh:

Understanding the role of stock market in mobilizing the resources efficiently (which causes the

higher rate of investment and ultimately promotes the economic growth of the country) has been

an unbeatable issue in modern financial theory. A viable stock market provides a more

diversified set of channels (in channeling the limited resources from surplus units to deficit units)

for financial intermediation to support growth, thus bolstering financial stability of economy.

The stock market through scanning the potential investment projects will stimulate the rate of

productive investments in economy. This implies that an economy with well- functioning stock

markets will experience a higher growth rate of productivity. The irreversible process of

financial reforms, the financial globalization, and the deregulation of the financial systems have

been throwing up daunting challenging for developing countries like Bangladesh. The very

common ways of meeting these challenges are to overcome these apprehensions, to promote

structural improvements to stock markets and to speedily move towards the development of the

country’s stock market. The growth and phenomenal change in Bangladesh stock market can be

gauged from the following discussion. The table below will give different sorts of information

regarding the stock market indicators of the country.

The significant differences can be found in the indicators between the periods before and after

the liberalization. Prior to liberalization the market showed significant increase in 1986 by



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registering a gain of 90 percent in local index. Moreover, the trading value increased by 700

percent. However, after that the market went on a falling trend. The trend continued even in the

year of liberalization (1991). It seems that the real response to liberalization measures came after

three years in 1994. In particular the trading activity increased by 2096 percent causing the

turnover ratio to increase from 1.4 to 14.3 percent. Then the market reacted extraordinary in

1996 by registering a gain of 176 percent in local index. Look at the pattern of the volume of the

market capitalization and the value of total shares traded on the stock exchange (the two

inexorable variables used by different research studies for assessing the developments of equity

markets). The following chart highlights the information regarding these two variables over the

years.

Stock Market Development of Bangladesh

Year Market

Capitalization

% of GDP

Value Traded

(million Tk.) Value Traded

% Change Turnover

Ratio No. of Listed

Companies % Change

in Index

1981 0.19 6 0.10 25 101986 0.91 48 700 1.1 78 901990 1.14 195 306 1.4 134 25.0

1994 3.08 4284 2096 14.3 170 115.0 1996 11.66 29958 600 24.2 186 175.5 2000 2.71 40287 39 74.4 221 31.7 2003 3.18 19102 (51) 23.2 247 14.0

2004 3.2 24980 30 32.5 250 122005 3.1 32675 30.80 36.76 262 212007 9.6 41328 26.48 42 350 33.5

Source: Estimated from WDI(1995,2000,2004,2003)and SEC Annual Reports (1995,1998,2000,2002,2004,2006)

The above diagram clearly depicts that over the 1980-90 period, the volume of market

capitalization and total shares traded value on stock exchange in Bangladesh are exceptionally

small as there were no pillar standing in the chart during these periods. The average volume of

market capitalization during the 1980-1985 period was taka 1469 million and taka 113660

million during the 2001-2004 period. In case of average value traded, the volume increased to

taka 45121 million during the 2001-2004 period from the only taka 15 million during the 1980-

1985. It clarifies that from the early 90s the market capitalization starts rising but total shares

traded value is still insignificant. After that period both these variables have significantly showed

increasing pattern compared to the previous period. This trend represents that stock market



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underwent tremendous changes from 1991 for Bangladesh stock market. In view of the

background the major objective of the paper is to make attempt in the study to know whether the

development of stock market can influence the real economy of the country.

Figure 1: Average Market Capitalization & Traded Value

THE OBJECTIVE OF THE STUDY

The linkage between stock market and economic growth has occupied a central position in the

development literature (see Samuel, 1996; Demirguc-Kunt and Levine, 1996; Akinifesi, 1987;

Levine and Zervos, 1996). The study attempts to investigate the impact of stock market

development on economic growth for Bangladesh



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THEORETICAL FRAMEWORK

Stock markets allow for more efficient financing of private and public investment projects. By

representing ownership of large-value, indivisible physical assets by easily trade able and

divisible financial assets, and making trade in them more liquid, they promote the efficient

allocation of capital. They give lenders the opportunity to diversify their investments. In these

roles, stock markets increase the quality and quantity of intermediate funds. The above diagram

demonstrates, in essence, how the stock market- in presence of market frictions (transaction cost

and information cost) performing its different functions affects the economic growth in terms of

capital accumulation and technological innovation.

Figure 2: Theoretical Framework of Stock Market Development on Economic Growth



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5.Importance of an efficient SEC in the economy:

Back in 2011 an incident took place in the history of the capital market of Bangladesh which was

caused by the inefficient and improper functional role of SEC BD. Once again this incident made

clear indication about the importance of a properly functional and efficient SEC in the economy.

Below the details about that incident is discussed elaborately.

An abrupt crash of the share market in 2011 had sparked violent protests from the investors. It

was the biggest one-day fall in the Bangladesh stock market's 55-year history. It is estimated that

over 3.5 million (35 lakh) people - many of them small-scale individual investors - had lost their

money because of the sharp plunge in share prices.

When there is more than 10 per cent loss within a few days in the market, it is called stockmarket crash. Stock market crash is differentiated from the stock market correction, where the

loss is 10 per cent or less. "Stock market crash is a sharp and unexpected decline of the market

prices for a very short period of time, usually accompanied by the decline of many other assets'

prices." It causes significant capital losses to investors and speculators. The market participants

become panicked which leads to more losses.

The 2010-12 Bangladesh share market scam is part of the ongoing share market turmoil in the

two stock exchanges - the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange

(CSE). The crash is deemed to be a scam aggravated by government failure. The stock market

was in turbulence throughout much of 2009, with the long bullish trend starting to turn grim.

This was the biggest fall since the dark days of 1996, when the market saw a sudden rise and fall

in a short spell of time.

The market turmoil began this time with the entrance of GrameenPhone into the capital market,

when the index rose by 22 per cent in a single day on November 16, 2009. Share prices

continued to fluctuate, reaching the annual high in mid-2009 before plummeting by the end of

2009, with retail investors threatening a hunger strike. The market continued to be turbulent

throughout 2010, with the DSE hitting its all-time high revenue and the largest fall in a single

day since the 1996 market crash, within the space of a month.



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DSE General Index soared to its highest levels from October to December 2010, with the peak

on December 5, 2010 at 8,918 points. DSE's index on January 3, 2010, was at 4568.40 and went

up at a staggering 4,350 points - a 95.23 per cent increase! On January 10, 2011, trading on the

DSE was halted after it fell by 660 points, or 9.25 per cent, in less than an hour - the biggest one-

day fall in the 55 years of the bourse. CSE also met the same fate.

An abrupt crash of the market sparked violent protest from the investors. Share prices started to

fall from January 03, 2011 as investors had the information of on-going liquidity crisis in

financial and non-financial institutions. The down slope of index was noticeable from January 02

to 10, 2011, as chairman of the probe committee Khondkar Ibrahim Khaled, chairman of the

probe committee on share market scam, mentioned, "Due to trigger sale of shares from 2nd to

5th January 2011, the market experienced its biggest decline in share prices and market crash

from 6th to 10th January 2011. On 9th January 2011, DSE General Index declined by 600 points

and all indices declined nearly 7.75 per cent. On 10th January 2011, Dhaka Stock Exchange

General Index lost 660 points or 9 per cent and Chittagong Stock Exchange Selective Index

declined by 914 points or 6.8 per cent within 50 minutes of trading. It is estimated that three

million people --- many of them small individual investors, have lost money because of the

plunging share prices. The benchmark Index climbed 80 per cent in 2010, but had lost more than

27 per cent since early December 2010."

Stock market crash in 1996: The number of BO account holders in 1996 was only 300,000

and most of them were new in the market. During the crash of 1996, paper shares used to be sold

in front of DSE, and it was not easy for investors to detect the fake shares from the genuine ones.

There was no automated trading system, surveillance was not strong enough, and there were no

circuit breakers as well as international protection. From 1991 to the end of 1995, DGEN (DSE

General Index) price index gained by 139.3 per cent and reached 834 point. But in 1996, the

market experienced a dramatic change and pushed the price index up by 337 per cent. DGEN

Index recorded a high growth from July and stood at 3648.7 points or 280.5 per cent on 5th

November 1996. Besides, Chittagong Stock Exchange experienced the same change and grew by

258 per cent. Chittagong Stock Exchange index increased from 409 to 1157 points in 1996

within a one year's time. But the steps taken by the government did not work. The index lost over

233 points on November 6, 1996. After the bubble burst, DGEN index dropped to its lowest



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point and stood at 957 in April 1997. It stood at around the same point, where it was 10 months

before and DSE General Price Index lost almost 70 per cent from its highest point in November

1996. Then the index continued to decrease for the next 7 years until April 2004. During this

long period, DGEN Index seldom crossed 1000 point.

Reasons behind share market crash: Different analysts found different factors affecting

the stock market crash of 1996 through 2011. The reasons of the crashes pointed out by market

analysts, economists and different organizations are summarized below.

Margin calls: When investors pay a part of the future market contracting in cash or selected

instruments in an account with a broker is called Margin. To make sure the obligations of the

investor when the contract expires, more margins are necessary if value of the contract decreases.

The process is called 'margin call'. On the 'Black Monday', price movement of future contracts

created record amount of margin calls for firms which were about 10 times the average size.

Collected payments are paid to the investors, whose position had gained. Some investors lost

their ability to enter new positions due to margin calls and some needing extension of credit to

make the payment. As investors were unable to pay margins, brokers placed emergency margin

calls with exposed option positions, which were assumed to be liquidated due to failure of

meeting margin calls. On the other hand, maximum big investors quit their investment selling

their shares. As a result, small investors panicked and they were selling their shares in spite thelosses. It occurred repeatedly which possibly prompted selling pressure in the market and the

markets were not able to handle these sale orders.

By the end of 2010, it was well known that the capital markets of Bangladesh was overvalued

and overheated.

The central bank had taken measures to cool the market down and control inflation by putting a

leash on the liquidity. The conservative monetary measures adversely affected the capital market,

with the market falling once on December 13, 2010 by 285 points, over 3.0 per cent of the

DGEN Index, which stood at around 8,500 points. The capital markets suffered a second fall on

December 19, 2010 with the index falling a further 551 points, or about 7.0 per cent. This 7.0 per

cent fall in the Dhaka Stock Exchange's index on a single day was the largest fall in the 55-year



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history of the Exchange, surpassing the fall of the 1996 market crash. This fall was deemed

'normal' by analysts, who believed that the market was overvalued.

Investors took to the streets in protest. Immediate measures were taken by the regulatory body,

Securities and Exchange Commission and Bangladesh Bank, which relaxed its conservative

measures, to pacify the fall. Within December 2010 and January 2011, the DGEN index fell from

8,500 by 1,800 points, a total 21 per cent fall. The masterminds of the crash are estimated to have

made about Tk 50 billion (TK 5,000 crore) out of the scam. The market fell by 5.0 per cent on

June 12, 2011 before taking a 4 per cent plunge on October 11, 2011, sending the market into

further turmoil.

The fall finally triggered the small investors to form the Bangladesh Capital Market Investors'

Council and go on a fast-unto-death on October 16, 2011. The market stood at around 5,500

index points on October 2011 from 8,900 only a year ago.

Investigation committee finds massive manipulation in share market: A high-powered committee

investigating the stock market debacle, headed by Khondkar Ibrahim Khaled, found heavy

manipulation in the stock market and has blamed the market regulator for failing to oversee the

situation. The committee made a series of recommendations for a major overhaul of the

regulatory SEC, including the replacement of its current chairman. "All the institutions that have

anything to do with the stock market were responsible for the debacle," former central banker

Khondkar Ibrahim Khaled, a former central banker, told newsmen after submitting the report to

Finance Minister AMA Muhith.

Some suggestions for market improvement: Sponsor-directors' mandatory holding of 2.0 per

cent shares individually and together 30 per cent shares and book building method in IPO have

been developed. Adoption of software and surveillance team to monitor overall trading activities,

trustworthy IPO approval process, and actual book building process should be introduced with

offloading government shares. Margin loan decision should be taken by broker houses and

merchant banks, not SEC. Insider trading should be strictly prohibited. Tools for regulators

should be suggested that prevent this kind of crashes in future. Regulators should perform their

job honestly and sincerely and SEC needs honest officials. Insider trading should be prohibited,

omnibus accounts should be converted into BO accounts.





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