AB Bank's merchant banking wing was fined Tk 10 crore yesterday for disbursing excess margin loans in violation of securities rules.The penalty is the highest the regulator has imposed on a listed company since 2001. The Securities and Exchange Commission (SEC) also asked the merchant banking wing to submit the fine to the commission within the next 15 days. Managing director of AB Bank could not be contacted over his cell phone for comments despite repeated attempts. (anybody seen him around?) After an investigation the SEC found AB Bank's merchant banking wing disbursed around Tk 528 crore loans against its paid up capital of only Tk 57 crore during mid 2007 when stock market experienced an abnormal bullish trend due to liquidity glut stemming from excess margin loans. The wing mainly disbursed the loans among its employees and their relatives. (a big happy family...sucknig blood of innocent retail investors). “According to the securities rules, a merchant bank cannot provide margin loan more than five times of its paid up capital whereas AB Bank's merchant banking wing provided loans by around ten times of its paid up capital,” said Farhad Ahmed, executive director of SEC.The loans merchant banks offer to investors to buy shares is commonly known as margin loans. The merchant-banking wing of the bank swindled more than Tk 66 crore during the period last year, according to the SEC investigation report. The investigation found that the bank by disbursing excess loans created a liquidity glut, leading abnormal price hike of shares in some companies. In some cases, the share prices jumped by around 300 percent, the investigation revealed.The SEC investigation also revealed that AB Bank's merchant banking wing through its stockbrokers -- AB Bank Foundation, Ahmed Brothers Securities, Popular Equity, ARC Securities and Country Stock (Bangladesh) - used the netting facilities illegally in selling and buying shares on the spot market.
AB Bank has put on a new avatar these days, trying their best to wash their hands off sins commited in the past. They have a new logo, a new brand repositioning. Its time to start afresh for the happy AB family....they have sucked enough blood of unaware retail investors of the Bangladeshi Stock Markets.
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