Merchant Banks/ Investment Banks are operating in Bangladesh under license from Bangladesh

Securities and Exchange Commission (BSEC). The main functions are mainly:

(i) Underwriting IPOs:

(ii) Managing new issues

(iii) Right issue

(iv) Corporate advisory

(v) Structured finance

(vi) Portfolio management

Bangladesh Merchant Bankers Association:

Bangladesh Merchant Bankers has an Association (Bangladesh Merchant Bankers Association)

which was formed under the companies’ Act 1994 and registered with the Registrar of Joint
Stock Companies on 9th November’ 2004. Association is a member of the Federation of the
Bangladesh Chamber of Commerce & Industry (FBCCI).

The functions of merchant banking are listed as follows:

1. Raising Finance for Clients: Merchant Banking helps its clients to raise finance through
issue of shares, debentures, bank loans, etc. This finance is used for starting a new business or
project or for modernization or expansion of the business.

2. Giving Advice on Expansion and Modernization: Merchant bankers give advice to their
clients for expansion and modernization of the business units. They help their clients through
giving expert advice on mergers and consolidations, acquisition and takeovers, diversification of
business, foreign collaborations and joint-ventures, technology up-gradation, etc.

3. Helping in Project Management: Merchant bankers help their clients in the many ways.
Like advising about facility location although it is rare in our country, preparing a project report,
conducting feasibility studies, making a plan for financing the project, finding out sources of
finance, advising about concessions and incentives from the government

4. Special Assistance to Small Companies and Entrepreneurs: Merchant banks help their
clients by giving advise small companies about business opportunities, government policies,
incentives and concessions available. It also helps them to take advantage of these opportunities,
concessions, etc.

5. Managing Public Issue of Companies: Merchant bank advice and manage the public issue of
companies.

 They provide following services:

 Advise on the timing of the public issue.
 Advise on the size and price of the issue.
 Acting as manager to the issue, and helping in accepting applications and allotment of
securities.
 Help in appointing underwriters and brokers to the issue.
 Listing of shares on the stock exchange, etc.

6. Handling Government Permission for Industrial Projects: A businessman has to get

government permission for starting of the project. Similarly, a company requires permission for
expansion or modernization activities. For this, many formalities have to be completed.
Merchant banks do all this work for their clients.

7. Provide Services to Public Sector Units: Merchant banks offer many services to public
sector units. They help in raising long-term capital, marketing of securities, foreign
collaborations and arranging long-term finance from term lending institutions.

8. Corporate Restructuring: It includes mergers or acquisitions of existing business units, sale

of existing unit or disinvestment. This requires proper negotiations, preparation of documents
and completion of legal formalities. Merchant bankers offer all these services to their clients

9. Portfolio Management: A merchant bank manages the portfolios (investments) of its clients.
This makes investments safe, liquid and profitable for the client. It offers expert guidance to its
clients for taking investment decisions.
10. Leasing Services: Merchant bankers also help in leasing services. Lease is a contract
between the lessor and lessee, whereby the lessor allows the use of his specific asset such as
equipment by the lessee for a certain period. The lessor charges a fee called rentals.

11. Money Market Operation: Merchant bankers also helps in dealing with and underwrite
short-term money market instruments, such as:

♠ Government Bonds.
♠ Certificate of deposit issued by banks and financial institutions.
♠ Commercial paper issued by large corporate firms.
♠ Treasury bills issued by the Government.

12. Management of Interest and Dividend: Merchant bankers help their clients in the
management of interest on debentures / loans, and dividend on shares. They also advise their
client about the timing (interim / yearly) and rate of dividend.
List of Merchant/Investment Banks in Bangladesh(according to BSEC):
Current laws, Rules and Regulations for Investments banks:

The capital market of Bangladesh is going through a period of transition. Its eco-system is
gradually developing. The main key reason of having a regulator is to keep the field fair for the
issuers, brokers, investors and other relevant parties. As such, a new rule is enacted or an
amendment of the older rule is prescribed every other day. BSEC (Bangladesh Securities and
Exchange Commission) generally makes and regulates these rules and regulations in Bangladesh.
Some rules are enacted with a view to strengthening the existing environment of the capital
market, while the others are enacted as an immediate response to the market condition.

Being the overall guardian of the financial system, Bangladesh Bank also passes laws and rules,
which generally holds utmost importance in the market. In the most recent times, some rules and
guidelines have dramatically changed the nature of game.

Established Guidelines:

There are a series of past guidelines, rules and ordinances which needs to be examined and re-
examined in light of the prevailing environment of the market:

i) Asset-backed Security Issue Rule – 2004

ii) SEC (Mutual Fund Ordinance) – 2001

iii) SEC (Stock-dealer, stock-broker and authorized representative) Ordinance – 2000, SEC
(Market maker) Ordinance – 2000

iv) SEC (Merchant Bank and Portfolio Manager) Ordinance – 1996

v) Margin rules – 1999

vi) SEC (Prohibition of insider-trading) Regulation – 1995

vii) SEC (Security Custodial Service) Ordinance – 2003

A few Recent Rules and Amendments:

Alternative Investment rule (2015):

Set up the foundation for establishing venture capital fund, private equity fund and impact fund
in our country, this rule seems adequately detailed right now. But, it will require amendments
with the pace of time in order to fit into the real business model.

Amendment of Public issue rule (2006):

The Public Issue Rule has been amended and it has set the basic guideline for properly pricing
IPOs and the allocation of IPOs to the respective parties. Namely

i). The provision under para (5) of sub-clause (b) of Clause (16) of the sub rule "B" under rule 8
shall be replaced by the following new provision, namely: "Provided that premium on public
offering shall not exceed the amount of premium charged on shares issued (excluding the bonus
share) within immediately preceding one year" (notification was given on 24th July, 2008.)

Amendment of Capital Issue Rule (2001):

According to the Securities and Exchange Commission, the issue of capital in Bangladesh by the
listed companies should be subject to certain further conditions in the interest of the investors
and the capital and securities market. The following are the further conditions to the consent
already accorded by it to the listed companies:

The security (except debt security without conversion feature, including the equity security)
issued in part or in full against any convertible security by a listed company. shall be subject to a
lock in of :

(a) 3 years in case of directors and those who hold 5% or more shares

(b) 1 year in case of others, from the date of issuance of such security, or from the date of
issuance of consent, whichever is later. (given on July 9th, 2009.)