Chittagong Stock Exchange Innvestors' Protection Fund Regulations, 1999

PRELIMINARY

WHEREAS it is expedient to frame regulations for establishing a Fund for the protection of the investors of a defaulting member of the Chittagong Stock Exchange Ltd. (CSE); 

Now, therefore, in exercise of the powers conferred by section 34 of the Securities and Exchange Ordinance (Ordinance XVII of 1969), the Chittagong Stock Exchange Ltd. makes, with the approval of the Securities and Exchange Commission, the following regulations, namely: -

1. SHORT Title

These Regulations shall be called the “ Chittagong Stock Exchange Investors’ Protection Fund Regulations, 1999”.

2. DEFINITIONS

• In these Regulations, unless there is anything repugnant in the subject or context
  • “Board of Directors” means the Board of Directors of Chittagong Stock Exchange Ltd.;
  • “Board of Trustees” means the Board of Trustees of the Fund;
  • “Commission” or “SEC” means the Securities and Exchange Commission
  • “Chittagong Stock Exchange“ or “CSE” means the Chittagong Stock Exchange Limited.
  • “Chairman” means the Chairman of the Board of Trustees;
  • “defaulting member” means a member of CSE who has been adjudicated as insolvent or has, as the case may be, wounded up voluntarily or otherwise, or who has failed to settle his customer’s dues in terms of money or security;
  • “Fund“ means the Chittagong Stock Exchange Investors’ Protection Fund   established by the Chittagong Stock Exchange Ltd. under these regulations;
  • “Investor” means a customer of a member of CSE placing funds or securities with the member for carrying out buy or sale transactions in security listed with CSE, and shall also include the money or security due to be paid or delivered to the customer by the member, but shall not include the member or any of the  directors or partners;
  • “Member” means a member of CSE;
  • “ Trustees” means a member of the Board of trustees;
  • “Year” means the calendar year of English era ending on 31st December each year;
• Words and expressions used but not defined shall have the same meaning as are assigned thereto in the Companies Act, 1994 the Securities and Exchange Ordinance, 1969, the Securities and Exchange Commission Act, 1993 and the Trust Act, 1882;
• Words importing the masculine gender shall, unless a contrary intention appears, be taken to include the feminine; and Words importing the plural number shall, unless a contrary intention appears, be taken to include the singular.

3. RECOGNITION of the Fund

• On the commencement of these regulations, there shall be established a Fund to be called the Chittagong Stock Exchange Investors’ Protection Fund.
• The Fund shall be irrevocable.

4. CONSTITUTION OF THE Board of Trustees FOR THE FUND

• The Fund shall be vested in and managed by the Board of Trustees.
• The Board of Trustees shall consist of:
  • a Chairman to be nominated by the Commission from among distinguished persons who are not in any way associated with any stock exchange.
  • one member director to be nominated by the Board of Directors.
  • one non-member director to be nominated by the Board of Directors
  • one member to be nominated by SEC from among the investors.
  • the Chief Executive Officer of CSE.
•  (3)The SEC shall nominate the Chairman and a Trustee within the first  month of each year.
• (4) The Board of Directors shall nominate the member director and non-member director Trustees in the first Board of Directors’ meeting each year. Provided that the first Board of Trustees shall be constituted within one month of coming into force of these regulations
• (5) A Trustee shall cease to hold office if-
  • he ceases to be an office bearer or a member of the Board of Directors , in case of  a member director of CSE;
  • his nomination is cancelled by SEC, in case of the Chairman or its nominee Trustee;
  • he becomes insolvent or is of unsound mind;
  • he is guilty of an offence involving moral turpitude;
  • he becomes incompetent to act for reason of illness or infirmity;
  • he leaves Bangladesh permanently;
  • he resigns from office of the Trustee;
  • he remains absent from three consecutive meetings of the Board of Trustees or from all meetings of the Board of Trustee for a continuos period  of three months, whichever is the larger, without leave of absence from the Board of Trustees.
• Any casual vacancy in the Board of Trustees shall be filled by-
• SEC within one month of occurrence of such vacancy, in case of the Chairman or its nominee Trustee;
• CSE in the next Board of Directors’ Meeting following the occurrence of such vacancy.
• A Trustee shall hold office for a term of one year, but shall continue to hold office after the expiry of his term till his successor enters upon his office.

5. POWERS AND FUNCTIONS OF THE BOARD OF TRUSTEES

• The Board of Trustees shall have the entire control over the administration and management of the Fund and shall be vested with all powers, authorities and discretion necessary or expedient for that purpose in addition to any express powers conferred by these Regulations.
• The Board of Trustees shall meet at least three times during the year and not more than six months shall elapse between any two meetings.
• Three Trustees present shall constitute a quorum at a meeting of the Board of Trustees.
• The Chairman shall preside over all meetings of the Board of Trustees and in his absence a Trustee elected at the meeting shall preside.
• Each Trustee shall have one vote and the decision of the majority shall prevail and in the case of equality of votes, the Chairman shall have a casting vote.[Top]

6. ACCOUNTS OF THE FUND

The Board of Trustees shall maintain proper accounts of the Fund and these shall be prepared and maintained in accordance with these Regulations.

 

7. AUDIT

• The Board of Trustees shall, within three months of closing of each year, get the accounts of the Fund audited by a practising chartered accountant appointed by it annually.
• Any vacancy arising in the office of the auditor shall be filled in by the Board of Trustees by appointing another qualified auditor.
• The Board of Trustees shall submit a copy of the audited report and statement of accounts to the SEC and Board of Directors within two weeks of receiving of the report.
• The auditor’s report and the accounts of the Fund shall be available to the members through the Board of Directors.

8. MEMBER’S Participation to the Fund

Participation to the Fund is compulsory for each member of CSE till he ceases to be a member of CSE for any reason whatsoever.

9. The Fund

• The Fund shall consist of contributions of CSE and its members, value of securities or amounts collected by the Board of Trustees on account of the customers of or a defaulting member, accumulations thereof, interest or profits received by the Board of Trustees in respect of such contributions, accumulations of investment in securities with such contributions, securities or amounts lapsed or forfeited, and of any capital gains arising from the transfer of the capital assets of the Fund and any other amounts as may be vested in or accrued to the Fund from time to time.
• All moneys forming part of the Fund shall be deposited into a bank account opened with any scheduled bank in the name of ‘Chittagong Stock Exchange Investors’ Protection Fund’.
• All investments and banking accounts of the Fund shall be operated jointly by at lease two of the Trustees as decided by the Board of Trustees
• The Fund shall be used to satisfy the claims of the investors and expenses under theses regulations

9. CONTRIBUTION TO THE FUND

• The CSE shall pay Taka 5(five) lac as initial contribution to the Fund immediately after coming into force of these regulations.
• CSE shall also contribute on quarterly basis to the Fund as its contribution (apart from other voluntary initial or specific contributions made to the Funds as the Board of Directors may at its discretion deem fit to contribute from time to time) the amount representing 0.50% (point five zero percent) of the listing fee received by the CSE during the immediately preceding quarter which shall be placed in the Fund immediately after closure of each quarter.
• The Board of Directors reserves to itself the right to alter, vary, discontinue at any time the contribution to the Fund without reference to the Board of  Trustees or the members of the Fund, but no such alteration, variation, discontinuance shall be made without prior consent from the SEC and be retrospective in nature.
• Every member shall contribute quarterly at the rate of 50 (fifty) paisa for every Taka 10(ten) lac or part thereof of his gross cumulative turnover (buy+sale) to the Fund immediately after closure of each quarter.
• The CSE shall be entitled to deduct from or adjust against the settlement accounts or any other accounts of the member the amount of the member’s contribution and shall place the amount in the Fund within three working days of closure of each quarter.[Top]

10. Contingency Fund From CSE

• If at any time the Fund becomes insufficient to satisfy the liabilities that are then ascertained of the Fund, the Board of Trustees may request the Board of Directors for such amount of contingency Fund as the Board of Trustees thinks it fit to satisfy such liabilities of the Fund.
• The amount of such contingency Fund shall be paid by CSE to the Fund within such time and under such terms as may be determined by the Board of Directors to be reasonable in relation to any particular case or situation.
• The contributions, other than the contingency Fund, made to the Fund by CSE and its members shall be non-refundable and shall not be considered as a debt due by the Fund to CSE or to any member.

12. INVESTMENT OF FUND

The Board of Trustees shall invest all monies of the Fund in such manner as may be authorised by law for the time being in force for investment of public charitable trust funds.

13.  LOSSES

Any loss or diminution in value of the investments of the Fund from whatever cause arising, not being due to the gross neglect or willful default or fraud of the Trustees, shall be borne by the Fund and the Trustees shall incur no responsibility or liability by reason or on account thereof. 

14. REFUND OR WITHDRAWAL OF CONTRIBUTION TO THE FUND

The CSE and the members shall not be entitled to any repayment or refund or withdrawal or withheld in of their due contribution to the Fund for any reason whatsoever.

15. Lodging of claims and SETTLEMENT against claims

• The Board of Trustees shall consider the principal amount only of the claims of investors of a member who has become a defaulting member arising in respect of any of the following events:
  • Winding up
  • Insolvency
• Claims of the investors may generally fall into the following categories:
  • Claims arising out of payments made to a member for securities which have been received from CSE but not delivered by the member;
  • Claims arising out of securities delivered to the member by the customer but in respect of which the sale proceeds have not been received;
  • Claims arising out of money in the hand of the member pending utilisation for buying securities or money in the hand of the member which has been improperly dealt with;
  • Claims arising out of securities in the hand of the member which have been improperly dealt with.

16.CERTAIN CLAIMS TO BE DISALLOWED

The Fund shall not be available for claims in respect of repayment of deposits or loans placed with or given to a defaulter member by any person or for any other transaction not connected with the purchase or sales of shares of securities listed with the CSE.

17. Time Limit FOR LODGING CLAIMS

• The Board of Trustees shall make declaration through at least two national dailies about calling for claim against defaulting member.
• Customers of a defaulting member shall lodge a claim with the Board of Trustees within a period of six months from the date of declaration of such member as a defaulter in accordance with these regulations.
• The Board of Trustees may not entertain any claim lodged after the expiry of the said time limit.

18. CLAIM AGAINST A DEFAULTing Member WHO HAS MEMBERSHIP IN More than one STOCK EXCHANGE in Bangladesh

• The claimant investor at his discretion may lodge claim with any one   Board of Trustees of similar Investors’ Protection Funds established by other Stock Exchanges in Bangladesh;
• In case of same claim lodged with more than one Board of Trustees the claimants investor’s discretion  will be sought by respective Board of Trustees to ascertain of  his desire as to from which Fund he likes to have the claim settled and the Board of Trustees shall also ascertain from each other so that the same claim is not lodged with and settled out of more than one such fund.

19. Determination of Nature of claims and settlements

• Where the Board of Trustees is satisfied that a claim for compensation is a proper claim, it shall make a determination allowing the claim.
• If the Board of Trustees is not satisfied as to the propriety of a claim for compensation, it shall make a determination disallowing the claim or, if it is satisfied as to the propriety of part of such a claim, it shall make a determination allowing the claim as to the part.
• The Board of Trustees after disallowing (whether wholly or partly) any claim for compensation from the Fund shall serve notice of such disallowance on the claimant or his lawyer, if any.
• Where the Board of Trustees makes a determination allowing a claim in whole or in part, it shall settle the claim as soon as is practicable.

20. COMPENSATION NOT TO EXCEED MAXIMUM LIMIT

• The compensation payable in respect of any single claimant investor shall not exceed a sum of Tk. 50,000/- (Taka Fifty Thousand Only) but the Board of Trustees may, at any time, in consultation with the Board of Directors increase the maximum limit of compensation payable as aforesaid.
• (2) If the Fund becomes insufficient to satisfy the liabilities of all the claimants at any given time, the Board of Trustees may allow compensation on a pro rata basis.

21. APPEAL

An investor is entitled to apply to the Board of Directors for reconsideration of the decision of the Board of Trustees within three months of the service of decision of disallowance or partial disallowance of any claim and the decision of the Board of Directors shall be final and binding and the Board of Trustees shall act accordingly.

22. CLAIM NOT TO AFFECT LEGAL PROCEEDINGS

The rejection or partial acceptance of any claim by the Board of Trustees or as the case may be, the Board of Directors, the grant of any compensation to a claimant investor shall not preclude or debar such investor to pursue his claim for dues against the defaulting member in any court of law or otherwise howsoever or other legal action on other grounds or causes of action of whatsoever nature, subject, however that the net claim of any such claimant investor against a defaulting member shall stand reduced to the extent of the compensation received by him from the fund.

23. DISCRETIONARY NATURE OF THE FUND

The Fund shall be a discretionary Fund and the Board of Trustees shall be under no legal obliged to collect the debts of a defaulting member or to make payments from the Fund as mentioned herein above.

24.BAR ON ASSIGNMENT

The contribution of a Member to the fund shall not be a debt due from the Fund and no Member shall be entitled to transfer or assign in any manner his contribution to the Fund.

25. ALTERATION OF REGULATIONS

• The Board of Directors with the prior approval of the Commission, may add to, alter, modify or repeal any of these regulations as the Board of Directors considers necessary but no such addition, alteration, modification or repeal shall have retrospective effect;
• If there is any repugnance between these Regulations and CSE rules, by-laws or other Regulations such repugnance, to the extent, shall be ineffective and the Board of Directors shall, with the prior approval of the Commission, remove such repugnance.

26. EXPENSES OF THE FUND

The Trustees shall not be entitled to any remuneration but shall be entitled to charge to the Fund all expenses of management and administration of the Fund including fees of auditors, legal advisers or other professional advisers and staff salaries, wages and all related costs, charges and operational expenses to which the Trustees shall be put to in connection with the management of the Fund or any legal claim thereon by any reason whatsoever.

27.INDEMNITY

The Trustees shall be indemnified by the Fund from and against all actions, proceedings, losses, damages, claims, liabilities, costs, charges and expenses in connection with the Fund or the management and administration thereof or any dealings therewith provided that the same shall not arise by reason of their gross neglect or willful default or fraud or of personal reason.

28. REPORTING to Sec and CSE

The Board Trustees shall furnish a quarterly report on the Fund and affairs of the Trustees to SEC and CSE within one month of the end of each quarter.

29. WINDING –UP

• The Trust shall be wound up, dissolved or liquidated only in the event of the dissolution of the Chittagong Stock Exchange Ltd.
• For the purpose of winding up the Board of Trustees shall first realise the assets of the Fund and after meeting all debts or liabilities and claims the amounts or assets so realised shall be and form a part of the property of the Chittagong Stock Exchange Ltd. and shall be appropriated or utilised accordingly.

By order of the Board of Directors

President

Chittagong Stock Exchange Ltd.