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COLUMN

It’s time to reform our financial services
I started my professional career in New York (USA), on completion of my Masters in early 1994, at the Metropolitan Life Insurance Company (Metlife) with the goal of becoming a stockbroker in the New York Stock Exchange (NYSE) in the near future. The stringent requirements of entry into the financial services industry in the US meant passing two exams successfully for licensing purposes before I could even accept the offer from Metlife as a Sales Executive. It would take three more months training, followed by six months of insurance sales experience, and the passing of another exam, before I was to become a stockbroker a year later (despite having a Bachelors Degree in Finance and a Masters in Economics, both from US institutions).
The exams were no piece of cake either. Successful examinees were expected to have solid knowledge of the financial markets, current events and developments, clearly understand the fiduciary responsibilities as a securities broker, and the rules and regulations governing the industry, and his/her chosen area of specialisation. The tests, and the licensing of successful candidates were the responsibility of the National Association of Securities Dealers or NASD, USA covering the whole spectrum of financial services industry.
I returned to Bangladesh in 1996, after only a year in the US
as a stock broker, as part of a two-man team tasked with setting up the brokerage division for Peregrine (HK), Bangladesh: the first international investment house to establish a full-fledged merchant banking operation in this country. In the early days of our operation at the Dhaka Stock Exchange (DSE), I assumed the duties of a floortrader, in addition to being the manager, since local recruitment was still a few months away. This decision also reflected the importance we placed on efficient trade execution, and complications
with the other alternative, as my superviser, Douglas Glen, was Scottish. I was excited to be back in action, and to experience live trading at the DSE. A ‘‘cry-out’’ method was the mode of trade execution at the sole stock exchange of the country then, as automated trading was still a few years away. It was an inefficient antiquated system that required traders to congregate on the 7th floor of the DSE building at 10.30 am on tradingdays.
I allowed myself some time, arriving a little earlier than 10.30 on my first day at the
fellow traders. I was first shocked, then amused, surveying the characters that gathered around the trading table. It would seem that the ability, by any means, to attract the attention of the trade recorder, was the only skill or qualification required, if any, on their behalf.
Over the next few days, I learned that some of my fellow traders were also performing the duties of 'tea boy”, whilst some tended the office reception during non-trading hours. I found myself amongst traders below the
legal age limit, and some over retirement age with a foot in the grave. For good measure, a few housewives also graced the floor, qualified solely on the basis of a conjugal relationship to the member/staff of the DSE, whom they represented. Average educational level was around Higher Secondary Certificate (HSC), with a few exceptions that were either highly educated or almost illiterate. My shock turned to horror as I witnessed these same people recommending t r a d-ing/investment strategies to individual investors in the capacity as a financial adviser.
‘‘Cry Out” was replaced by automated trading in 1998, but unfortunately, the same didn't happen to many of the traders. Ten years later they remain, now active inside cubicles, having learned to operatea PC.
The financial services sector, including the capital market of Bangladesh has tremendous growth potential. Particularly, the capital market is poised for natural growth as the market capitalisation to GDP ratio is still below the desired level. In other words, the market has to grow, just to catch-up with the current GDP level, regardless of a positive economic and/or corporate environment. However, the potential benefits of a booming capital market will elude us if the industry' is not brought under comprehensive regulation and monitoring, particu-
larly of those who are involved in selling, advising, trading and managing of financial securities.
Licensed securities professionals are equipped with knowledge, experience and insight to advise clients in a timely manner and on the right course of action. They are also aware of their responsibilities, having been screened and tested to demonstrate that they possess a clear and thorough understanding of the markets and risks, client's goals (in terms of investment), and the fiduciary responsibility that comes with being a professional in the industry*. Licensing also allows monitoring by the authorities for malpractice.
"Reform” is the key. Government agencies, NGOs, and even the most traditionalists of political parties have embarked on this “reform" bandwagon. However, the operators and regulators of our capital market, a vital part of the economy, are yet to embrace reform even at the basic level of setting appropriate standards, guidelines, and procedures for the professionals in the securities business. Maybe, its time to establish an institution like the NASD (as in the US) to bring about much needed reform in the financial services industry of Bangladesh.
The writer is an investment adviser, independent financial consultant and a lecturer at School of Business. IUB Comments: anwar_asif@hotmai! com