BSEC gives brokers until 2030 to adjust negative equity, simplifies IPO process
The Bangladesh Securities and Exchange Commission (BSEC) has introduced a series of regulatory measures to ease financial pressure on stockbrokers and merchant banks, streamline initial public offering (IPO) approvals and facilitate the listing of eligible bonds on stock exchanges' main boards.
According to a BSEC press release issued on Tuesday, the measures will allow market intermediaries to gradually adjust accumulated negative equity by 2030 through mandatory annual provisioning. The reforms also introduce a single-window review system for IPO applications and open the way for eligible securities listed on the Alternative Trading Board (ATB) to move to the main board.
Saiful Islam, president of the DSE Brokers Association (DBA) and director of BRAC EPL Stock Brokerage Ltd, welcomed the decisions, saying they addressed several long-standing demands of the brokerage industry.
"The extension on negative equity provides much-needed relief to brokerage houses struggling with accumulated losses following prolonged market weakness," Saiful said.
He added that the measure was important to protect institutions from a sharp deterioration in net asset value (NAV) and net capital, which could threaten their operational viability and regulatory licences.
Negative equity adjustment and operational restrictions
Under the new BSEC directive, institutions holding negative equity as of September 30, 2026, must make provisions at a minimum rate of 25% annually from 2027, with full adjustment targeted by 2030.
However, the facility does not allow institutions to accumulate fresh unprovisioned negative equity. Any new exposure created during 2026 must be fully provided for within the same calendar year and cannot be carried forward under the phased adjustment scheme.
Saiful stressed that the extension was not a waiver of provisioning requirements, warning that failure to meet annual targets would trigger regulatory enforcement.
To protect investors and prevent further risk accumulation, BSEC has also imposed operational restrictions on affected beneficiary owner (BO) accounts.
Intermediaries will be allowed to sell existing shares in negative-equity accounts and reinvest the proceeds in 'A' category shares to rebalance portfolios. However, they cannot extend fresh margin loans against such purchases or execute transactions on the block market.
The directive also prohibits charging interest on margin loans or levying portfolio management fees on affected BO accounts. Investors will not be held liable for claims or demands arising from negative-equity accounts, while institutions benefiting from the adjustment facility will be barred from declaring or distributing cash dividends.
The measures address a longstanding financial burden on the capital market stemming from the 2010 stock market crash, which left many margin borrowers unable to repay loans and weakened market intermediaries.
According to BSEC data released in July, total negative equity stood at 10,978 crore taka as of May 2026. Brokers and merchant banks had provisions of 3,668.46 crore taka against the amount, leaving a shortfall of 7,309.61 crore taka.
Unrealised losses stood at 4,042 crore taka against provisions of 1,984 crore taka, creating a further gap of 2,058 crore taka. This brought the total provisioning deficit across the market to 9,367 crore taka.
Single-window IPO reviews and bond market expansion
In another major change, BSEC approved a single-window review system for IPO proposals to eliminate procedural duplication and speed up approvals.
Under the new arrangement, the relevant stock exchange will conduct the primary review and incorporate BSEC's observations into a consolidated assessment, replacing the previous dual-review structure.
Saiful said the consolidated review process would make IPO approvals simpler and more efficient.
"An efficient and predictable timeline will encourage reputed corporations to come to the market," he said.
The commission has also opened the way for eligible bonds and debt securities listed on the ATB to apply for listing on the main board. Issuers must submit applications by November 30, 2026, subject to compliance with the standard Listing Regulations.
Saiful described main board bond trading as another important milestone for the capital market, saying it would help develop a more active secondary market for corporate debt securities.
He said the reforms would collectively reduce operational hurdles, improve market efficiency and strengthen Bangladesh's capital market.