Transparency blackout: 51 firms hide financials while BSEC lags behind global standards

The integrity of Bangladesh's capital market is facing a severe credibility crisis as 51 listed companies – representing over 12% of the bourse – continue to flout mandatory disclosure requirements by failing to publish their financial results.

While international bourses like the London Stock Exchange (LSE) enforce an "automatic suspension" for even minor reporting delays, the Bangladesh Securities and Exchange Commission and the Dhaka Stock Exchange continue to rely on nominal daily fines that many companies simply ignore.

Of these 51 non-compliant firms, a staggering 20 have already shuttered their operations. Despite having no active production or revenue, these "ghost companies" remain on the trading board, where their shares are often subject to manipulation, trapping the capital of unsuspecting retail investors in a total information vacuum.

'Sub-judicial' shield

Market analysts and industry insiders point to a systemic failure in corporate governance, heavily exacerbated by legal loopholes that companies frequently exploit to avoid public disclosure. 

According to existing company laws, if a firm fails to hold its Annual General Meeting (AGM) within the stipulated timeframe, it must secure High Court approval to convene the meeting at a later date.

Companies routinely use this sub-judicial status as a tactical shield, arguing that they cannot legally publish quarterly or annual results while the broader AGM matter is pending in court. This practice effectively leaves shareholders in a complete information vacuum, unable to assess the value of their holdings or the actual health of the companies they own.

For instance, Bangladesh Welding has not published an annual report since 2019, while Keya Cosmetics and Shurwid Industries have kept their books closed to the public since 2020.

Other high-profile defaulters include Beximco Limited, Shinepukur Ceramics, Keya Cosmetics and S Alam Cold Rolled Steel, all of whom have stalled their reporting cycles.

Banks, non-bank financial institutions (NBFIs), and insurance companies are being granted relaxations in listing regulations, as their ability to publish financial statements is contingent upon approval from their primary regulators, such as Bangladesh Bank and the Insurance Development and Regulatory Authority (Idra), according to the DSE.

Domestic forbearance vs global discipline

The regulatory response in Bangladesh remains notably soft compared to global practices. Currently, the DSE imposes a daily penalty of Tk5,000 for delayed quarterly reports and Tk500 for annual reports. However, a senior DSE official admitted that most companies do not pay these fines until they require a specific regulatory approval from the exchange.

"We are essentially a fine-collector, not an enforcer of listing integrity," the official told The Business Standard. "We only collect the arrears when a company comes to us for other regulatory jobs."

This stands in stark contrast to the London Stock Exchange, where any delay in submitting audited accounts triggers an automatic trading suspension to maintain market integrity. If the failure persists for six months, the company is permanently delisted.

Case study of Beximco Pharma 

This disparity in enforcement recently hit home for Beximco Pharmaceuticals, which is dual-listed on the LSE's Alternative Investment Market. While the BSEC in Dhaka allows for prolonged reporting delays, the Alternative Investment Market suspended Beximco Pharma's shares on 2 January as soon as it missed its reporting deadline.

The delay was caused by a legal battle over the BSEC's appointment of independent directors to the board. Faced with the risk of being permanently delisted from the London market, foreign investors pressured the BSEC to intervene. 

Consequently, the regulator was forced to grant a special waiver, allowing the company to hold a board meeting with its existing directors (excluding the disputed BSEC appointees) solely to approve and publish the financial statements. This incident underscored how international pressure, rather than domestic rules, often drives transparency for local heavyweights.

A breeding ground for manipulation

Operational reports from the DSE confirm that "paper companies" like Appollo Ispat, Aramit Cement, Emerald Oil, and Khulna Printing remain listed despite being out of operation. Even more alarming are cases like Familytex, which possesses no physical assets, and Generation Next, whose top management is reportedly out of contact and residing abroad.

Abul Kalam, a spokesperson for the BSEC, acknowledged that the regulator has historically been hesitant to delist firms, preferring to keep them on the board in hopes of a turnaround. However, investment experts warn that this "wait-and-see" approach is damaging.

"When you allow 51 companies to hide their financials, the market becomes a breeding ground for 'blind' speculation and pump-and-dump schemes," said the managing director of a leading brokerage firm. 

"The BSEC must adopt an aggressive stance similar to the LSE, where reporting delays lead to immediate trading halts. Without automatic suspensions, the burden of corporate failure will continue to fall on retail shareholders who are trading based on rumours rather than facts."

Saiful Islam, president of the DSE Brokers Association, said that following the BSEC's directive, the DSE has already taken steps to curb market manipulation. He expressed hope that both the BSEC and the DSE would take necessary action against non-operational companies to safeguard the interests of investors.