A file photo shows investors demonstrating in front of the Dhaka Stock Exchange in protest at continuous fall of share prices. The SEC’s guideline for implementing compensation scheme for investors contradicts the finance ministry order. — New Age photo

The Securities and Exchange Commission’s guideline for implementing stock market compensation scheme contradicts the finance ministry order on charging interest on margin loan after waiving 50 per cent interest.
The SEC last week finalised a guideline that allowed stock brokers and merchant banks to charge additional interest on the margin loans of small investors which would remain after deducting the waiver.
The SEC included a provision that the loan providers can charge additional interest if investors fails to pay the interest amount in time, adding that the rate of the interest could not be more than the original rate.
According to the finance ministry order on March 7, the remaining 50 per cent of the interest would be transferred to a block account without charging further interest and the investors would be allowed to pay the money in equal quarterly installments for three years.
The SEC guideline also said that if any investor under the scheme failed to pay three consecutive installments of the rescheduled loan interest he would be out of the compensation programme.
When asked about the scheme implementation guideline, SEC officials denied making comment on the issue.
‘The official order regarding the scheme implementation is yet to be served.  So we are unable to give any statement on the matter,’ SEC executive director Saifur Rahman told New Age.
The commission also decided to make some changes in the Securities and Exchange Commission (Public Issue) Rule 2006 for including provisions for 20 per cent quota allotment of the affected investors.
The SEC will also send order to market operators for implementing the 20 per cent quota for the affected investors in the initial public offering under investors’ interest protection rules.
The finance minister, Abul Maal Abdul Muhith, on March 4 said that 50 per cent of the past year’s margin loan interest will be waived and a 20 per cent quota in IPOs would be allotted for small-scale investors who suffered losses because of the 2011 stock plunge.
The package also allowed merchant banks and brokerage houses that provide the loans to reschedule the principal amount of the margin loans, calculated till November 2011, after deducting interests.
The rescheduling would be allowed for three years with a maximum interest of 10 per cent.
However, no merchant bank or brokerage house, except state-run Investment Corporation of Bangladesh, waived interests on margin loans given to its clients after two months from the government’s order on the matter. 
Market insiders said the merchant banks and the brokerage houses were taking advantage of the government announcement as the government, in its order, did not make such waiver mandatory.
After a free fall in share prices in 2011, prime minister Sheikh Hasina in November last year had asked the SEC to work out a package to minimise the losses incurred by the investors in the crash.