The Bangladesh Securities and Exchange Commission (BSEC) has launched an investigation into Mercantile Bank Securities PLC over negative equity accounts, potential unauthorized trading and compliance with previous regulatory directives.
Under Section 21 of the Securities and Exchange Ordinance, 1969, the regulator issued an order on 2 November appointing a three-member team comprising BSEC Additional Director Md Iqbal Hossain and Assistant Directors Md Amirul Islam and Amit Adhikary to conduct the enquiry.
The team has been directed to submit its findings within 60 working days.
The investigation will primarily examine the brokerage's compliance with a BSEC directive issued on 13 November 2025 and its subsequent action plan.
Investigators will identify all negative equity accounts, outstanding loans, market value of holdings and provisions, and reconcile the figures against audited financial statements and records from the Dhaka Stock Exchange, Chittagong Stock Exchange and Central Depository Bangladesh Limited.
The team will also examine whether buy orders or trades were executed through negative equity accounts after 13 November 2025, either directly or through linked, nominee or family accounts.
The probe will further investigate share and fund transfers involving account holders connected to the brokerage's sponsors, directors and employees, as well as the role of senior management in creating and maintaining the exposure.
Other areas of scrutiny include margin agreements, margin calls, forced-sale practices, risk management, internal audit findings and the adequacy of provisions. The regulator will also assess whether portfolio management fees or proposed portfolio rebalancing activities would violate conditions imposed under previous regulatory orders.
Responding to the development, Mercantile Bank Securities CEO Md Raquibul Islam Russeau attributed the negative equity accounts to legacy issues dating back to the 2010 stock market crash.
"Brokerages that were around in 2010 almost all carry negative equity problems to varying degrees. That is a legacy issue, and perhaps that is what BSEC wants to inspect," he said.
Russeau, who joined the company as CEO in February 2026, said he had not identified any violations of securities regulations during his tenure. He added that the brokerage had yet to receive the formal investigation letter, limiting his ability to comment on the specific grounds of the enquiry.
Defending the company's financial position, he said Mercantile Bank Securities had paid-up capital of 360 crore taka and had remained profitable over the years.
"Our balance sheet is very strong, and we are continuously making profits," he said, adding that the company had maintained provisions against legacy exposures in accordance with BSEC guidelines without any shortfall.
He acknowledged, however, that the brokerage still had negative equity accounts carried over from previous years.