Corporate governance guidelines:

The Bangladesh Securities and Exchange Commission has initiated 'Corporate Governance'
guidelines for the listed companies on 9th February 2006. The guidelines are not compulsory
for the listed companies. Salient features of the guidelines are:

The number of Board of Directors should not be less than 5 (five) and more than twenty.
The Banks, non-bank financial institutions, insurance companies and statutory bodies
shall follow the prescription of their respective primary regulators in this regard.
Appointment of at least one-fifth of the total number of the company's board of
directors should be 'independent non-shareholders directors' in the Board.
The Chairman and the Chief Executive officer simultaneously can not be the same
person and the Board should clearly define their respective roles and responsibilities.
The "Directors' Report" prepared as per Companies Act may include additional
statements on :-
o The financial statement presents fairly company's state of affairs, the results of
its operation, cash flows and change is equity. While preparing the financial
statement -
The accounting estimates are based on reasonable and prudent judgement,
Appropriate accounting policies have been consistently applied, IAS is followed
in preparation of the financial statements, proper books of accounts have been
maintained.

o Disclosure on company's ability as a going concern and if not so then the fact
along with the reasons thereof,
o Explanation on the significant deviation from last year in operating results, if so
happened,
o Summarize of at least last three years key operating and financial data,
o Reasons for non declaration of dividend (if not declared) for the year,
o Significant plans and decisions along with future prospects and risks
o Number of Board Meetings held during the year and attendance by directors,
o Aggregate number of shares held by:
Parent/Subsidiary/Associate companies. Directors, CEO, Company Secretary,
CFO, Head of Internal Audit and their spouse and minor children. Top five
salaried employs other than the above mentioned persons. Shareholders holding
ten percent or more voting interest in the company.

The Companies is required to appoint a Chief Financial Officer (CFO), a Head of Internal
Audit and a Company Secretary. The CFO and Company Secretary are required to attend
the Board meeting.
 The companies will form an Audit Committee comprising of at least three members
including at least one independent non - shareholder director. The Audit Committee
shall assist the Board in handling the issues, which might be overlooked and ensures a
good monitoring system within the business.
The Committee is required to make report on its activities to the Board. An immediate
report have to made to the Board on the following findings:
o conflict of interest;
o suspected or presumed fraud or irregularity or material defect in the internal
control system
o suspected infringement of laws
The Board of Director shall rectify everything, which as per Committee Report has
material impact on the financial condition and results of operation of the Company. The
Committee has to report to the Commission if the Board has unreasonably ignored the
rectification.
The company will not engage its external/statuary auditors to provide the Bookkeeping,
Broker-dealer, Actuarial, Internal audit services or any other service that the Audit
committees determine.

The guidelines will definitely help to protect the rights of minority shareholders as well
as ensure more transparency and accountability in the Management of the companies.

Bangladesh Stock Market Crash

A loss of more than 10% within a few days in a market is called market crash. It xcasuses a huge
capital loss of investors. In 2010-2012 DSE and CSE faced a serious fall in market. The market
fall when the unrealistic bullish trend started to turn grim. The market fall started at the time
hen Grameenphone came the capital market, when the index rose by 22% in a single day. Share
price continued to fluctuate reaching the high in mid 2009. It continued to rise unboundly and
in 2010 it hit the all time largest fallin a day.
19th December was a historical day of the financial year 2010-11 in Bangladesh
stock market. On this day DSE witnessed its biggest one day fall in 55 years history until the
date with losing 551.76 points or 6.71 percent. The losing index was even higher than 284.78
points or 3.32 percent of 12th December. Prices started to fall in an hour after the trading
started and about 200 points were wiped off. In the middle of the session it recovered little bit
and ended up the session at 7654 point. CPD reported (2011) found, internet based trading
operation, opening branches of brokerage houses across the country, easy access to the market
information, arranging a countrywide 'share fair' are the factors for increasing investors. But
supplies of new securities through IPOs were not enough to chase huge capital of too many
investors in the market. Banks & other financial institutions of Bangladesh had a lot of excess
liquidity due to less business opportunities in the recession period of 2009-10. To minimize the
cost of bearing excess liquidity and as great opportunity, theses financial institutions & its
officials as well as other people took loan and invest in the share market. This made a huge
flood of liquidity in the share market. It was seen that the
daily transaction in the share market was on an average from Taka 20,000 to 30,000 million in
2010 and the figure was double comparing to 2009.
To boost the economy Bangladesh Bank has taken adaptive monetary policy during the high
inflation periods to support investment.
As Taka has been undervalued, it has made excess growth in money supply. Last couple of years
remittance made excess liquidity and the main motive behind it was Bangladesh Bank`s
exchange rate policy. A big portion of this excess liquidity had gone to the stock market but
there were very few shares in the market. The policy that was adopted by Bangladesh Bank to
grow economy by increased exports & investment eventually misguided and ended up with
invitation of the stock market bubble. Moreover Security & Exchange Commissions was
not capable to monitor the market conditions properly. Due to the poor monitoring & market
shadowing share prices of Z Category Companies and small companies increased dramatically.
Moreover, some initiatives taken by SEC were not effectiveand changed directives frequently su
ch as; it changed directives of margin loan ratio 19 times.

The Reasons for Bangladesh Stock Market Crash:

The companies in this country, with the help of dishonest auditors, generated faulty audit
reports that overvalued their assets. Since wrong signals were provided about the realistic
financial competence of different companies and bonus shares that were issued, the New Asset
Value was unrealistic. The wrong information sent to investors was one of the main factors that
set the foundation for this crisis.

In addition to asset revaluation, the improper use of omnibus accounts also contributed
towards the crisis of the stock market of Bangladesh. Omnibus stock holding accounts are a
specific type of accounts that involve multiple investors who do not have the accounts in their
names, although they are actual shareholders. These accounts were one of the major devices of
manipulation in the Bangladeshi stock market. Investigation reports showed that omnibus
accounts were used for making manipulative transactions of over Taka 2.5 billion. The biggest
reason for the usage of omnibus accounts by the big players was the ability to gamble in the
market without disclosing the actual number of shares from omnibus accounts.

Due to the beneficial climate for manipulative activities on the stock market, wrong directives
and unethical behavior of market regulators and their employees, an artificial active trading
environment was created among some manipulators. In addition to these factors, the huge
remittance flows contributed to serious account surpluses. Instead of keeping the money on
bank savings account, many people were lured into making great investments on the
favorable stock market that promised earning more money within a short period of time. Due
to lack of investment knowledge and faulty information provided by the manipulators, inflation
went past 11% by the 2010 and the bubble burst.

Stakeholders, market analysts and economists name faulty asset revaluation, usage of omnibus
accounts and uninformed investing as three of the most important reasons for the Bangladesh
stock market crash. The suspicious transactions of the top players created artificial climate that
affected the behavior of all other investors. The combination of these three factors led to an
abnormal rise and an inevitable fall.