The Bangladesh Securities and Exchange Commission (BSEC) is going to amend the listing regulations where the listed firms will be penalised with a monthly 2.5% surcharge in case they fail to transfer undistributed dividends to the Capital Market Stabilisation Fund (CMSF) timely.
The commission has already instructed the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE) accordingly.
According to the BSEC, the surcharge will be imposed on the listed firms that fail to transfer the investors’ unclaimed dividends to the CMSF within three fiscal years.
The penalty will be charged on non-refunded public subscription money against their initial public offering (IPO) funds and all the accrued interests.
Alongside the amendment for future unclaimed dividends, the BSEC has fixed 30 June this year as the last date for the listed firms to transfer the existing unclaimed dividend to the CMSF. Any firm that fails to meet this deadline will have to pay the surcharge.
After the amendment of the listing regulations 2015, the issuer companies will be automatically obliged to transfer the unclaimed dividend as soon as three fiscal years pass.
Listing regulations are basically a set of conditions for issuers that get publicly listed on the stock market. And, they have to comply with these conditions even after their listing.
On failure to comply with these rules, the issuers might face the music of the stock exchanges.
Earlier in June this year, the BSEC wrote to DSE and CSE about the aforementioned amendment of listing regulations 2015.
Back in 2021, the CMSF was formed in order to bring the unclaimed dividends – that had been lying around in the listed firms’ accounts for years – under an umbrella.
Dividends are shareholders’ rights. The companies have deprived them of their rights by not paying dividends. Professor Shibli Rubayat Ul Islam, chairman, BSEC
An unclaimed dividend is any dividend that is not collected or claimed by the investors from the issuers within three years or more from the date of the distribution.
Professor Shibli Rubayat Ul Islam told The Business Standard, “Some companies have defrauded shareholders over the years. Dividends are shareholders’ rights. The companies have deprived them of their rights by not paying dividends.”
“Some of the companies have been found to use these funds for themselves rather than paying to the shareholders.”
“Therefore, if this amendment clause is added to the listing rules, the dividend will no longer remain in the company’s accounts after a specified period.”
“The amount will go to the CMSF, which in turn will be injected into the stock market. If any investor claims a dividend, it will be settled from there,” he added.
So far, the CMSF has been injecting the fund on its own and planning to inject fresh funds through intermediaries to support the stock market.
CMSF officials said some issuers are delaying to submit unclaimed dividends in spite of several warnings and time extensions by the stock market regulator.
Now, the BSEC is going to be strict on collecting such dividends, the officials added.
As of 2 May, 289 companies have transferred a total cash dividend of Tk520.10 crore. And, 193 companies have transferred 8.49 crore shares with a market value of Tk693.19 crore to the CMSF.
The bonus dividend payout ratio is only 4.38% and the cash dividend payout ratio is 86.77%.
The CMSF will primarily be used to stabilise the capital/securities markets and ensure liquidity through the buying and selling of listed securities, investments in other securities, loans, and other forms of support for market intermediaries and market makers, securities lending and borrowing (SLB), and the resolution of investor claims.
According to CMSF rules, a maximum 40% of the cash balance of the fund may be used for direct buying and selling of listed securities.
At least 50% of the cash in the fund shall be used for providing loans to market intermediaries for refinancing as margin loans, while a maximum of 10% may be used for investment in other securities, such as fixed deposits, government securities, fixed income securities, mutual funds, etc.