Bangladesh Stock Market ( CSE & DSE )

An Introductory Startup Guide for NRB

Who are NRB? A Bangladeshi citizen living abroad with valid status:
1. Either as foreign country’s permanent resident or with valid work permit
2.In case of a foreign passport holder an endorsement either from the relevant Bangladeshi embassy or from Bangladesh foreign ministry stating that “No visa is required” for traveling to Bangladesh – as a proof of dual citizenship

What are the benefits for Investing as NRB? 1. 10% of all issued IPO are reserved for NRB – may be increased very soon for at least very large issues
2. No Capital Gains tax
3.Minimum 60% of ICB NRB Mutual Funds are reserved for NRB’s (Last one advertised on 11th April, 2008)
4. Can also trade in the secondary capital market while abroad through Nominee.

How to start? 1. Open a BO Account and a Trading Account as an NRB with any broker house
2. Assign a Nominee (Power of Attorney).
3. Start

What is a BO Account? BO Account stands for Beneficiary Owners Account. This is the account that holds you shares like an inbox holding all you emails.
1. All share from new IPO’s and most of secondary market shares are in electronic form and a BO account, owned by the investor, hold the electronic shares
2. All NRB are requested to open a BO account through any one of the Brokerage house of DSE by filling required forms and submitting required documents

What are required to open BO Account? 1. Photocopy of Passport / Social Security Card / Resident Card etc
2. An FC account with any Bank with branch in Bangladesh
3. Passport size photographs
4. A Nominee – beneficiary in case of death of the investor. His/her signature and photo (duly attested by the investor) on the prescribed form provided by the brokerage house
5. Employment certificate / trade license copy / work permit or Pay slip / tax return document as a proof of earning status of the NRB
6. A nominated person with POA (Power of Attorney) who will sign trading documents on behalf of the NRB while he is abroad. His/her photo (attested by the NRB) and signature in a prescribed form by the brokerage house (POA can be any adult person of legal age residing in Bangladesh)
7.If the broker is a bank then an extra form of KYC (Know your customer will also have to be filled)
8. Initial fund will have to be a check or pay order or other allowed form drawn from the FC account

What is a Trading Account?
1. Trading account is an account, with the broker, in which the NRB will deposit his/her initial investment from which the broker will credit or debit fund for buy/sell
2. All earnings from the investment can be first transferred to a local currency account of the NRB and then to the trading account through help of the POA
3. Trading account will allow the NRB to allocate fund for investment in the secondary market
What is a NITA Account?

Trend of continued payment: Non-resident Investment Taka Account (NITA) is an account for repatriation of earnings from investment. All earnings from investments (e.g. Cash Dividends) are credited to the NITA account An audited statement, certifying that all proper taxes are already withheld from the earnings, from the auditors of the earnings issuing company need to accompany the earnings. Upon issuance of the auditors certificate the earnings can be repatriated to the NRB in foreign currency If an investors intention is not to repatriate any foreign currency then NITA account is not mandatory.

From where should an NRB open his accounts? Home or Abroad!
Home
Its easiest if the NRB is in Bangladesh to open the BO account for investment. All he/she have to do is to visit a proffered brokerage house and fill some forms and get the Nominee and the POA to sign From then the NRB can go back abroad and continue applying for IPO’s or continue trading in the secondary market

Abroad
1. If you are abroad and intend to open the BO from there then you need the following steps:
i. Collect the relevant forms from your proffered brokerage house via mail. Fill it up and get the introducer part attested by the local Bangladeshi Embassy as a proof of the NRB status by providing to them the required documents.
ii. Get your photos attested by the local Bangladeshi Embassy as well
iii. Send the forms back to the brokerage with the Nominee and POA part filled. Send the POA to the brokerage house.

How to Buy or Sell?
1. IPO application needs to be filled on a prescribed form. Such forms can be obtained through mail, website of issuing company, or through broker etc.
2. Trading in secondary market is done by Buy/Sell order forms. If POA (Nominee) is assigned then the POA need to sign the Buy/Sell order form within 24 hours of order placement If NRB wishes not to assign a POA then orders can be placed via phone or email (broker approval required) and then a signed Buy/Sell order form needs to be faxed to broker within 24 hours
3. Trading will be carried out within prevailing market guidelines
4. Shares will be credited or debited to the BO account accordingly

What happens to Dividends, Bonus etc?
1. Cash Dividend warrants will be issued to the NRB. These are usually account payee cheques. So this can either be deposited to NRB’s local Bank Account, FC Account or to NITA accounts then may be to the trading account to be reinvested in the secondary market through the broker, if the POA follows the proper procedures
2. All Bonus Shares will be credited to the BO account
3. Earnings can be withdrawn from the investments by placing a request to the broker

The broker will issue an account payee cheque in local currency in the name of the NRB How to redeem the cheque is up to the NRB – e.g. he/she can deposit it to a local account or NITA (Non-resident Investment Taka Account) account Repatriation of earnings can be done through NITA accounts by following proper guidelines

Flow Chart Of Investment

Q: What do the initials CDBL stand for?
A: Central Depository Bangladesh Limited

Q: Will all brokers be participants?
A: All brokers must have access to the system (either directly or indirectly) to settle stock exchange transactions. However, only some brokers, upon obtaining certificate of registration from the SEC, will become full service participants and will be able to manage accounts on behalf of customers Contact CDBL for an up to date list of full service participants.

Q: Who, other than brokers will be participants? A: Financial Institutions may become participants to manage the securities they hold. In addition banks, who offer domestic, regional and global custody services may also become participants. Contact CDBL for an up to date list of custody participants.

Q: Are all listed securities eligible for holding and settlement in CDBL?
A: In the long term all listed securities should become eligible securities. However, the depository will make securities eligible one b one (or in groups) to ensure that the system is not overloaded and that all issuers receive proper training in the operation of the system. Contact CDBL for an up to day list of eligible securities.

Q: Is it safe to hold my securities in CDBL?
A: CDBL has to keep satisfied the Securities and Exchange Commission that it has implemented a system that is safe and secure. In addition the Commission has ongoing regulatory responsibility for CDBL. All messages between CDBL and the participants are encrypted and CDBL has a hot standby site so that all data is duplicated. The Law makes CDBL responsible for compensating investors if they suffer loss as a result of the negligent actions of CDBL or its employees.

Q: Will all investors need to have CDBL accounts?
A: An investor who does not trade will not be forced to have a CDBL account. However, the use of a CDBL account (either Direct or through a Participant) would remove the need to keep paper share certificates in a safe place. Periodic statements would ensure that these investors always have an up to date record of their investments.

Q: If I hold my shares in CDBL can I vote at company meetings?
A: Yes, The Law requires companies to treat depository account holders as members of the company for all purposes.

Q: If I hold my shares in CDBL, will I receive my dividends?
A: Yes, The Law requires companies to treat depository account holders as members of the company for all-purpose. In most cases you will receive your dividend from the company in the same was you do today. However the regulations permit companies to use facilities offered b CDBL to distribute dividends if they wish to do so.

Q: How do I open an account?
A: You will need to open an account through a participant unless you wish to open a Direct Account at CDBL.

Q: What will it cost me?
A: This will depend on which participant you use. The amount the participant will charge you is not fixed by the Law or the Regulations.

Q: Can I rematerialize at any time?
A: Yes, However, CDBL will charge your participant a fee for dematerializations, which will be passed on to you.

Q: What happens if I die?
A: Your securities will be transferred to your heirs or rematerialized in accordance with normal legal procedures.

Q: Can I open a joint account with another?
A: Yes, but you will need to agree with your participant whether both signatures and only one are required on any instructions affecting the account.

Q: Should wait until I want to sell to dematerialize my securities
A: You may do this if you wish. However, In this case, you will need to wait until the issuer has confirmed that the securities have been dematerialized before the broker can enter the sell order into the market. This will take time.

Q: What is a depository needed? A: The need for a depository arose from shortcomings in the present settlement system, resulting in:
• Lengthy delays in delivery settlement and transfer of securities;
• Tedious procedures for verification of securities and transfer deeds;
• Considerable time involved in dispatching cash dividends and bonus shares;
• Risk of damaged, lost, forged and duplicate securities;
• Serious problems associated with physical custody;
• Tedious procedure involved in pledging of physical securities to raise capital.
Central Depository Bangladesh Limited (CDBL), a joint venture company setup by banks, stock exchange, Asian Development Bank and other institutions operates the Central Depository System (CDS) in Bangladesh. CDBL, by converting physical certificates into electronic form, will eliminate the risks of damaged, lost, forged and duplicate share certificates. The instantaneous delivery through electronic book entry will result in immediate transfer of ownership, which presently can take over a month. CDBL, in the long term, will also reduce the costs of the investing public.

Q: Who are the Owners of CDBL?
A: The Depository Regulations, 2000 requires that the sponsors of any depository be a
• Financial institution;
• Bank;
• Stock exchange;
• Body corporate established or formed under any law;
• Company listed with any stock exchange; or
• Other national or international institution specified by the SEC.
Accordingly the stakeholders of CDBL, numbering over 70 institutions are:
• Nationalized Commercial Banks;
• Provide Commercial Banks;
• Foreign Commercial Banks;
• Insurance Companies;
• Dhaka Stock Exchange;
• Chittagong Stock Exchange;
• Investment Corporation of Bangladesh;
• Listed Companies; and
• The Asian Development Bank
This wide spread of ownership demonstrates the support of the financial market in Bangladesh for the development of a Central Depository System (CDS).

Q: Who are the Participants of CDBL?
A: The following types of organizations may become CDBL participants:
1. Stock brokers/dealers (members of the Dhaka and Chittagong Stock Exchanges);
2. Banks;
3. Financial institutions;
4. Insurance companies;
5. A statutory organization;
6. Merchant bankers;
7. Asset managers;
8. Custodians; and
9. An other capital market intermediaries registered with the SEC.

Q: About the Categories Participants at CDBL?
Trading Participant
May only settle stock exchange trades and cannot maintain accounts on behalf of customers;
Full Service Participant
This is a stock exchange member who may hold shares and operate accounts on behalf of customers;
Custody Participant
May hold shares and operate accounts on behalf of customers but is not a stock exchange member;
Settlement Agent Participant
May settle stock exchange trades on behalf of stock exchange members.

Q: What is about Direct Accounts?
A: CDBL is offering a service to investors who wish to hold their securities in dematerialized form but do not wish to use a stockbroker or a bank to do so. Investors will be asked, by CDBL, to complete an account opening form. They will then be able to dematerialize existing holdings by giving the certificates to CDBL or to their stockbrokers and completing the dematerialization request form. When they wish to sell their securities they should instruct CDBL in writing to transfer the required number of securities to the stockbroker. When they buy they should instruct their stockbroker to transfer the securities to the Director Account on the settlement day. It is not necessary, in this case, to instruct CDBL. CDBL will not handle funds and investors must make arrangements to settle payments directly with their stockbrokers. CDBL will issue statements directly to the account holder on a monthly basis, if there are any movements and on a quarterly basis, if there are no movements.

Q: About the Method of Operation
Method of Operation are given below:
1. The investor opens an account with a participant or CDBL
2. Certificates are ‘dematerialized’ by lodging them at the issuer.
3. The issuer updates the register and moves the holding to the depository portion of the register.
4. The investor sells on a stock exchange through a stockbroker and another investor buys.
5. The stock exchange advises CDBL to update its records.
6. CDBL debits the sellers account.
7. CDBL credits the buyers account.
8. Investors may dematerialize if they wish.

Q: What is the Procedure open an Account?
A: Investors may open an account with any CDBL participant for an up to day list of participants please call CDBL help line. The participant will request the investor to sign an agreement, which will set out the rights and duties of both the investor and the participant .The participant will then open an account for the investor at CDBL. Normally the account will be in the name of the investor. If the participant is going to mix one investors securities with another in an omnibus account then this must be specifically stated on the agreement. Where the account is in the name of the investor then the Law provides that the account holder is a member of the company even though his securities are dematerialized. The participant is required (under the regulations) to provide statements on at least a monthly basis if there are movements on the account. Even if there are no movements the participant must provide a quarterly statement.

Q: What is Dematerialization (demat)
A: Dematerialization is a process by which physical certificates are converted into electronic form for credit to the investors account in the depository. Once a security is eligible for holding in CDBL then all stock exchange trades must be settled through the depository. This means that sellers must have securities in the depository (i.e. the securities must have been dematerialized) before the broker can execute the sale order. To dematerialize securities investors should take their share certificates to a participant. The participant will request the investor to complete a dematerialization request form. The participant will take the documents to the issuer who (if the certificate is valid) will update the register by moving the securities from the certificated portion of the register to the depository portion. The issuer will then confirm the dematerialization to the depository and the depository will credit the securities to the investor’s account. The participant will be able to see the balances in all the accounts that he controls through a computer link with CDBL. Investors do not need to wait until they wish to sell to dematerialize their holdings. Once a security is eligible, investors may open accounts and lodge securities at any time.

Q: How Buying and selling are happening?
A: The introduction of CDBL does not make any difference to the process of buying and selling although it does make a difference to the settlement of such trades. Where investors have a CDBL account through their broker then the act of giving a sell order to the broker also authorizes him to move Sucrets from the account to settle the sale. The broker will move the securities when he enters the order into the market. If the order is executed then the securities are used to settle the sale. If the order is not executed then the broker will move the securities back to the investor’s account. Where investors have a CDBL account through a custodian (who is not a broker) then they must advise their custodian that they have sold as they do for physical securities. However, the securities must be in a CDBL account before they are sold and the broker may wish to check this fact with the custodian before executing the order. On the settlement date of a bough trade the broker will move securities to the account of the buying investors (provided the investor has paid). Investors may leave the securities in their account (ready for sale when they wish to sell or to avoid the need to hold certificates) or they may request the participant to rematerialise the securities.

Q: What is the procedure for Rematerialisation (remat)?
A: To rematerialise securities that are in a CDBL account the account holder must instruct the participant through which he holds his account by completing a rematerialisation request form. The participant will instruct CDBL and the securities will then be debited from the account upon confirmation by the issuer. The issuer will transfer the holding from the depository portion of its register to the certificated portion of its register. The issuer will provide the investor with a share certificate within 30 days of a rematerialisation request.

Q: About Fees & Deposits will require?
A: CDBL will charge fees to participants, issuers and Direct Account Holders, who are also required to lodge security deposits with CDBL, which are refundable upon termination. CDBL does not charge fees directly to account holders. Participants are charged fees which they ma recover from investors holding accounts with them. Prospective Direct Account Holders should contact CDBL for an up to date fees & deposits schedule.

Q: Which Technology does CDBL uses?
A: Main Data Centre of CDBL is equipped with HP9000 rp7400 Enterprise Class Servers, HP SureStore E Disk Array FC60 Controller, HP SureStore E DLT Library 4/40 Deskside and ancillary equipment. Disaster Recovery Backup Centre of CDBL is located at Grameen IT Park, Mirpur and equipped with another set of the same equipment as the Main Data Centre. Data update is every fifteen minutes via radio link using Cisco Aironet 350 devices. Software application VeDAS (Versatile Engine for Depository Accounting System) is built on a threetier architecture, with Visual Basic as the Front End, TUXEDO as the middle tier transaction manager, and Oracle 8I as the Back End Centralized database.