BSEC fines Sikder Insurance board Tk11 lakh over IPO fund misuse
Regulator finds Sikder Insurance exceeded the permitted FDR investment limit and failed to utilise Tk6.08 crore earmarked for office space.
The Bangladesh Securities and Exchange Commission (BSEC) has imposed fines on the board of directors, managing director and company secretary of listed insurer Sikder Insurance Company Limited for violating securities laws and conditions governing the utilisation of its IPO proceeds.
According to a BSEC order, 11 individuals, including the company's chairman, vice-chairman, nine directors, managing director and chief executive officer, and company secretary, have each been fined Tk1 lakh. The total penalty stands at Tk11 lakh, which must be paid from their personal accounts.
The penalised individuals are Chairman Nasim Sikder, Vice Chairman Mamtazul Haque Sikder, Directors Lisa Fatema Haque Sikder, Mohtasim Billah Khan, Monica Sikder Khan, Jonas Sikder Khan, Salah Uddin Khan, Jeffrey Khan Sikder and Mandy Khan Sikder, Managing Director and CEO Sk. Abdur Rafique, and Company Secretary Abdur Razzak.
The individuals have been directed to deposit the fines with the BSEC through bank draft or pay order within 30 days of the order, the regulator said. The commission added that failure to do so will result in legal action under securities laws.
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The commission has taken the actions as per report by an inspection report, the inspection team formed by the regulator in November 2024, and subsequently, it submitted a report to the commission.
Sikder Insurance raised Tk16 crore through an initial public offering (IPO) in late 2023. The IPO proceeds were supposed to be utilised within three months of receiving the funds.
However, a regulatory inspection revealed deviations and a failure to utilise the funds within the stipulated time frame.
At a hearing before the commission, Sikder Insurance cited several reasons for the delay in utilising the allocated funds. However, the commission rejected the explanations and held the company's management and board responsible for the regulatory failures.
According to a BSEC order, the insurer invested Tk4.20 crore in fixed deposit receipts (FDRs) with nine banks, exceeding the permitted limit of Tk4 crore by Tk20 lakh. The company made the investment without obtaining the mandatory prior approval of at least 51% of its public shareholders.
Of the Tk4.80 crore allocated for capital market investments, Tk1.40 crore remained unutilised. The company attributed the shortfall to a liquidity crisis at National Bank Limited (NBL), which allegedly dishonoured two cheques totalling Tk1.40 crore issued for market investments. The BSEC observed that the failure had a negative impact on shareholder value.
Meanwhile, the entire Tk6.08 crore allocated for purchasing office floor space remained unutilised.
Although the board later voted in December 2024, and later shareholders in the annual general meeting to reallocate this fund toward Government Treasury Bills, the prolonged delay hurt profitability due to ongoing office rental expenses and opportunity costs, the order stated.
Sikder Insurance saved Tk21.28 lakh from its Tk1.11 crore IPO expense budget. However, it diverted Tk21 lakh of those savings into FDRs without proper shareholder consent or required price-sensitive information (PSI) disclosures.
Regarding the violations, the regulator asked the company for a hearing in June this year, representatives of Sikder Insurance Company submitted official explanations addressing the regulatory observations raised by the BSEC.
Regarding the excess investment in FDRs, the company management told the Commission that the additional Tk20 lakh was reallocated from the IPO expenses fund to FDRs to earn a return on the funds rather than keeping them idle.
Regarding the remaining balance, company officials assured the Commission that the funds would be utilised properly.
On the company's capital market investment, management said it had been trying to utilise the remaining funds in accordance with its policy. However, it could not deploy the funds within the stipulated period due to a liquidity crisis at National Bank.
The company also said the purchase of the floor space was delayed because of the liquidity crisis in the bank.
