A Dhaka court on Sunday asked five stock investors to appear before it on October 17 as the Securities and Exchange Commission sued them on charge of market manipulation that had helped bring about the January's capital market crash.
SEC director Mahbuber Rahman Chowdhury filed two cases on the day, accusing three of the investors of illegal trading in Peoples Leasing shares in one and the remaining two of unlawful trading in Eastern Housing shares in the other, violating the Securities and Exchange Ordinance, 1969.
After recording the cases, the first legal action taken by the stock market regulator since the share market collapse in January, the court of Dhaka metropolitan magistrate AGM Al Masud ordered the five defendants – Syed Sirajuddoula, his wife Rasheda Akhter Maya, Habibur Rahman, Abu Sadat Md Sayeem, and his brother Abdul Momin Molla – to appear before it on October 17.
The court asked Sirajuddoula, Rasheda, and Habibur to explain their position on the allegation of manipulative trading in Peoples Leasing shares and Abu Sadat and Abdul Momin on that in Eastern Housing Limited shares.
'Based on the probe report and the directive of the finance ministry, we have filed cases today, after completion of our investigation,' said a commission member.
In the cases, the five were accused of violating Section 17(e)(5) of the Securities and Exchange Ordinance, 1969.
The section defines market manipulation as activities that 'Directly or indirectly effect a series of transactions in any security creating the appearance of active trading therein or of raising of price for the purpose of inducing its purchase by others or depressing its price for the purpose of inducing its sale by others.'
In the first complaint, the capital market regulator accused Sirajuddoula, Rasheda and Habibur of making artificial active trading in Peoples Leasing shares, which caused the price of the scrip to shoot up abnormally.
According to the complaint, Sirajuddoula along with his partners had pushed the price of Peoples Leasing shares up by trading 2,22,700 shares of the company between themselves between June 30 and November 4, 2010. After each of the Peoples Leasing shares had been split into 10, reducing its face value from Tk 100 to Tk 10, the three accused investors sold their holdings and booked hefty profits.
In the second compliant, Abu Sadat and Momin were accused of their involvement in tampering with the share prices of Eastern Housing Limited through serial trading.
According to the complaint, the defendants, through their eight beneficiary owner's accounts including own and joint accounts, made 25 per cent of the total transaction of EHL shares in the market in July-August, 2010.
They bought 5.86 lakh EHL shares and sold 2.55 lakh shares of the issue through their BO accounts between July 27 and August 19, 2010, the complaint said, adding the volume of the trade was 24.5 per cent of the total transaction of EHL shares in the period.
Besides daily purchase and sales, the accused bought the highest number of 2.77 lakh EHL shares on a single day on August 1, 2010, which was 66.3 per cent of the total number of EHL shares traded on the day, the complaint said.
After the relentless fall in share prices in December to January last, the government formed a high-powered probe committee headed by Khondoker Ibrahim Khaled to investigate into the market crash.
The three-member committee, after conducting a three-month investigation, submitted the report to the government with a number of case studies of market manipulation. The committee also placed a 25-point set of recommendations including conducting further enquiries about the people suspected to be involved in market manipulation, reconstructing the SEC, and terminating some of its officials including the sitting chairman, Ziaul Haque Kahondker.
Finance minister AMA Muhith, while making the report public, said the government would take the recommendations into consideration and specified some term-by-term goals to bring back stability to the capital market.
Source : New Age
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