Presentation on Regulatory Framework of Capital Market Prepared by Mohammad Abul Hasan Director Bangladesh Securities and Exchange Commission

2 Disclaimer Views expressed in the presentation belongs to presenter and do not necessarily reflects the views of the Commission

3 Purpose of this awareness Program I) To provide an idea of financial market; II) To provide an idea of regulatory framework of capital market in Bangladesh; III) To provide an outline of securities related laws, rules & regulations in Bangladesh

4 Some Concept Financial Market: Financial Market refers to a conceptual “mechanism” rather than a physical location. It refers to the mechanism by which borrowers and lenders get together. Financial Market Money Market Capital Market

Financial Market Diagram 5 Financial System

6 Some Concept (continue)  Money Market The financial markets in which funds are borrowed or loaned for short periods where securities with maturity of one year or less are traded. Money markets securities are treasury bills, bankers acceptances, commercial paper, negotiable certificates of deposits etc.  Capital Market The financial markets in which funds are raised by the issuer for long term periods where securities with maturity of more than one year are traded. Capital markets securities are common/preferred share, debenture, bonds etc.

7 Some Concept (continue) Two Segment of Capital Market Capital Market Primary Market Privat Placement Public Offering Secondary Market Organized Section Unorganized Section

8 Some Concept (continue) Primary Market Primary markets are the markets in which issuers raise funds by issuing new securities. Secondary Market Secondary Markets are markets in which existing, previously issued securities are traded among investors.

Division of Capital Market 9

Organized Section Diagram 10

11 Regulatory Framework of Capital Market Framework means structure giving shape and support. Some legal structure and institutional structure is essential to run, regulate and control of a capital market which is called capital market regulatory framework.

12 Regulatory Framework of Capital Market Division of Regulatory Framework Legal Framework Institutional Framework

Regulatory Framework of Capital Market 13 BSECCDBLCSEOTCDSE Act/Ordinance Rules/Rgulation of BSEC Order/Directive/ Condition of BSEC Regulation/Bylaw of SRO

14 Legal Framework of Capital Market Law passed by the Parliament/Ordinance issued by the President Rule/Regulation issued by the Commission Order/Direction/Condition imposed by the BSEC Regulation/By Laws issued By the SROs

Legal Framework of Capital Market (Contd.) Basic Act & Ordinance The basic acts & ordinance that cover the capital market are:  Securities and Exchange Ordinance, 1969  Bangladesh Securities and Exchange Commission Act, 1993  Depository act, 1999  Exchanges Demutualization Act, 2013

16 Legal Framework of Capital Market (Contd.) The relevant acts that cover the capital market are: Companies Act, 1994 Trust Act, 1882 Insurance Act, 1938 Bank Company Act, 1991 Financial Institutions Act, 1993 Money Laundering Prevention Act, 2012

17 Legal Framework of Capital Market (Contd.) Rules/Regulation Framed By the Commission  Insiders Trading Prohibition Rules, 1995  Merchant Banker & Portfolio Manager Rules,1996  Credit Rating Companies Rules,1996  Margin Rules, 1999  Stock Dealer, Stock Broker & AR Rules, 2000  Market Maker Rules, 2000  Issue of Capital Rules, 2001  Over-the- Counter Rules, 2001  Mutual Fund Rules, 2001  Merger & Acquisition Rules, 2002  Security Custodial Services Rules, 2003  Issue of Asset Backed Securities Rules, 2004  Public Issue Rules, 2015  Right Issue Rules, 2006  Securities and Exchange Rules, 1987(Framed by Govt. Before Establishment of SEC)  Depository Regulations, 2000 (Issued under Depository Act 1999)  Depository (Users) Regulations, 2003 (Issued under Depository Act 1999)  Research Analysis Rules, 2013  Private Placement of Debt Securities Rules, 2012  Alternative Investment Rules, 2015

Rules/Regulation Framed by the Commission Securities and Exchange Rules’1987 Public Issue Rules, 2006 Right Issue Rules, 2006 Issue of ABS Rules, 2004 Security Custodial Services Rules, 2003 Merger & Acquisition Rules, 2002 Mutual Fund Rules, 2001

19 Legal Framework of Capital Market (Contd.)  Regulations Framed By Exchanges (SRO)  Memorandum & Articles of Association  Stock Exchange (Listing) Regulations, 2015  Stock Exchange (Settlement of Transactions) Regulations,2013  Stock Exchange (Settlement Guarantee Fund) Regulations,2013  Automated Trading Regulations, 1999  Short Sales Regulations, 2006  Investors Protection Funds Regulation  Internet Trading Regulations  Stock Exchange (Board & Administration) Regulations, 2013  Stock Exchange (Trading Right Entitlement Certificate) Regulations, 2013  Stock Exchange Bye Laws

20 Institutional Framework of Capital Market Bangladesh Securities and Exchange Commission Stock ExchangesCDBL Over the Counter (OTC)

21 Institutional Framework of Capital Market (Contd.) Bangladesh Securities and Exchange Commission  Established in 1993 under BSEC Act, 1993  Prime Regulator of Capital Market  Administers Securities Laws  Have Executive & Quasi Judicial Authority

22 Institutional Framework of Capital Market (Contd.) Mission of the Commission  Proper issuances of securities  Protection of the interest of the investors  Regulation of capital market  Development of capital market

Departments of the commission Commission Admin & Finance IAD SurveillanceCapital IssueSRISRMICRegistrationMF & SPVR&DMISCDSLAWEnforcement Commission Secretariat 23

24 THANK YOU