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BD Thai goes to court

Challenges sale bar on its shares

Staff Correspondent
The High Court has set October 15 for further hearing of Bangladesh Thai Aluminium Ltd's (BDThai) writ petition challenging the Securities and Exchange Commission's (SEC) imposition of a lock-in on sales of new convertible shares or shares against warrants issued by listed companies.
SEC imposed the lock-in through a notification in order to protect local investors' interest through averting short-term speculative trading by non-resident or foreign* ijiyestors, pr by local companies or investment firms, and to prevent flight of
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capital from Bangladesh stock market.
Lock-in is a measure by which investment companies are barred from selling their acquired shares before a certain period.
BD Thai, which had •issued shares against warrant S' to "a foreign irtVeltT* ment fund, also sought a stay order on the SEC notification issued in mid July this year.
A lock-in had been in place before as well since the 1996 share market scam until it was lifted a little before the share subscription deal was struck between BD Thai and the foreign investment firm GEM Global Yield Fund.
SEC re-introduced the lock-in following unearthing of questionable large amount of share sales by GEM Global in absence of any lock-in on the sales.
GEM Global bought a huge chunk of shares of BD Thai against warrants and dumped almost all the shares within a month and a half of the acquisition, repatriating $2 million from the Bangladesh capital market, according to a Dhaka Stock Exchange probe report.
GEM Global is incorporated in the Cayman Islands, a British overseas territory in the Caribbean. It is billed as a centre for tax evasion. It has a tax rate of zero for corporation tax, income tax, and capital gains, drawing some of the world's biggest banks and hedge funds to its shores.
The High Court heard the case on August 5, and set October 15 for further hearing, said sources present at the hearing.
BD Thai lawyers raised two questions, whether SEC has the authority to issue the notification, and what prompted the imposition of the lock-in?
In reply, SEC informed the court that it certainly has the authority to issue such notifications according to the securities ordinance.
Moreover, the stock market regulator argued, the notification was not issued for BD Thai only, rather it was issued for all listed companies including foreign ones.
Responding to the inquiry about the cause for the SEC notification, the regulator comprehensively said it imposed the lock-in to prevent flight of capital from the local market.
It explained, in March 2008, BD Thai's share price was well below its face value of
Tk 100 each, which rose to more than Tk 1,000 only within a year.
The news of large invesi-I ment by GEM Global into
BD Thai sent the latter's share price up.
GEM Global bought a huge chunk of shares at a price of Tk 375. But, within a month and a half, the foreign firm dumped all its shares at a price of Tk 909 each on the bourses, pocketing an astronomical amount of profit. It repatriated more than $2 million from Bangladesh within a month and a half investing only $500,000, SEC told the Court.
It is not investment, it is just speculative trading. Investment and speculative trading are not the same, SEC noted.
The stock market regulator also told the court, had it not re-imposed the lock-in, thousands of crores of taka would have flown out of the country.