SC stays HC ruling on regulators’ share credit directives

The Appellate Division of the Supreme Court on Sunday stayed a high court order staying the Securities and Exchange Commission’s directives on share credit and forced sales of shares by investors.
   The High Court on September 27 stayed for three months the SEC’s directives that asked stock brokers and bankers to go for forced selling of shares if any investor failed to adjust margin loans based on the newly introduced net asset value based calculation method by September 30.
   The court also halted the new system on calculating earning per share as introduced by the SEC.

The full bench of Appellate Division, headed by chief justice ABM Khairul Haque, stayed the HC stay order till the disposal of the writ petition filed with the HC by two investors challenging the SEC directives.
   Attorney general Mahbubey Alam moved the appeal of the SEC.
   The HC earlier passed the stay order after hearing a writ petition filed by two investors — M Morshadur Rahman and Mohammad Shahnewaz Jewel — challenging the legality of the SEC directives that had been issued to the stock brokers and merchant bankers for applying the ‘margin call requirements’.
   The HC bench of Justice Mamnoon Rahman and Justice Syeda Afsar Jahan also asked the authorities concerned to explain in four weeks why the SEC’s directives issued on September 6 and September 21 would not be declared illegal.
   The commission’s September 6 directive asked the brokers and merchant bankers to go for forced sales within September 30 while its September 21 directive asked the brokers and bankers to calculate earning per share of any issue on the basis of ‘diluted earning per share on income from continuing core operations’ while considering price earning ratio of any securities for disbursing credits.
   As per the SEC rules, any issue that has price earning ratio over 40 is not eligible to get margin loans.
   Abul Kalam Azad who moved the petition for the investors said that the SEC’s directives were reinstated after the SC order.
   Rokonuddin Mahmud and Fazle Noor Taposh also stood for the investors.
   The SEC took the steps to rein in fund inflow in the over-heated capital market as prices of most of the shares soared breaking all records almost on every trading day.
   The petitioners, however, argued that the investors would suffer huge losses if they were forced to sell their shares within September 30 at the current prices which are lower than their purchasing prices.