Earning millions from stock manipulation: Government official Heer faces case of unpaid fines

Government official Abul Hayer, aka Hiru, is a major investor in the capital market, big enough to influence him the way he wants: when he buys a stock, others follow his lead because they know it will be a sure shot. Using this enormous influence, he manipulated the prices of many stocks, making quick profits in the process.

Over similar manipulations in about a dozen companies, the Bangladesh Securities and Exchange Commission (BSEC) fined him and his accomplices at various times. in 2022. Since they failed to pay the fine within the stipulated time, the regulator has now filed four debt recovery cases.

According to the commission’s report, the market regulator fined the defendants over Tk 14 crore for serious violations of securities laws by influencing share prices of 11 companies.

Almost two years have passed, but Hayer and his family members have paid only about 5 million Turkish lira by October 15, officials added.

BSEC spokesperson Rezaul Karim told The Business Standard that the Enforcement Department has filed four reference cases against the respondents for recovery of outstanding fines.

Since the defendants failed to pay the fines within the stipulated 30 days, the previous commission headed by Shibli Rubayat-Ul Islam, who resigned days after the fall of Sheikh Hasina’s government on August 5, extended the deadline by one year.

Hayer has applied for an extension for another year to clear the debt of around TRY 10 crore in 12 installments. But on September 18, the commission rejected the request and began filing cases.

The commission once extended the time to pay the remaining amount, but we were unable to pay the fine because the market was bad.

Abul Hayer

In response to a question, Abul Hayer told TBS: “We have paid the commission a fine of 5-6 million tenge.”

He added: “The commission once extended the deadline to pay the remaining amount, but we were unable to pay the fine because the market was bad and we could not sell the shares.”

According to the law enforcement report, Hayer and his associates were involved in stock manipulation of Green Delta Insurance, Dhaka Insurance, Asia Insurance, Fortune Shoes, One Bank, NRBC Bank, BD Com Online, IPDC, Bangladesh National Insurance, Genex Infosys and Paramount Insurance.

Family members are also fined

The commission fined Hayer, his wife Kazi Sadiya Hasan, his father Abul Kalam Matber and his companies, DIT Co-operative and Desh Ideal Co-operative, about Tk 14 crore in 2022 after receiving evidence of share manipulation in 11 companies, including including in several insurance sectors.

According to the reports of the BSEC Enforcement Department, the realized capital gain was around Tk 50 crore and the unrealized capital gain was around Tk 100 crore.

Realized capital gains refer to the profits realized after buying and selling shares, while unrealized capital gains arise when shares have been purchased but not yet sold despite being available for sale.

Hyer and his co-conspirators were facing new fines for their role in manipulating Paramount Insurance shares.

On September 24, the commission imposed a fine totaling TKR 1.63 crore on cricketer Shakib Al Hasan, Hayer and their companies – Eashaal Communication, Monarch Mart, Lava Electronics Industries, and Abul Kalam Matber.

Eashaal Communication received the highest fine of Rs 75 lakh, followed by Rs 50 lakh for Shakib, Rs 25 lakh for Hayer and Rs 1 lakh each for Monarch Mart, Lava Electronics Industries and Matber.

On October 7, the commission informed the Ministry of Finance of the fines imposed on Hayer and his associates. The letter, a copy of which was obtained by TBS, notes that civil servant Hayer, along with his associates, manipulated transactions in shares of various companies on the capital market at various times. This manipulation caused significant losses to ordinary investors, disrupting the development of the market.

What kind of person are we talking about?

Abul Hayer is currently working as Deputy Registrar in the Department of Cooperatives.

In addition to trading through a beneficial owner (BO) account under his own name, Hyer engaged in stock trading using several BO accounts opened in the names of his relatives, family members and public organizations, all of which he controlled.

According to the law enforcement report, Hyer personally entered pleas on behalf of himself and his family members during commission hearings following each stock manipulation charge.

Violation of laws when trading shares and fines

According to the commission report, Hiru and his associates have committed offenses punishable under Sections 17(e)(v), (1) and (ii) of the Securities Act, which carry a minimum fine of Rs 5 lakh and the potential for criminal prosecution affairs.

Moreover, by acquiring more than the prescribed 10% stake in certain companies, they violated the acquisition and takeover rules.

Section 17 of the Securities and Exchange Regulations states that no person shall induce, dissuade, effect, prevent or in any way influence or take advantage of the sale or purchase of any securities, directly or indirectly.

Sub-section (e) of Section 17 adds: “No person shall do or do any act, practice or activity which acts or will act as fraud, deception or manipulation against any person. In particular, no person may make any fictitious quotation or create a false and misleading appearance of active trading in any security.”

In addition, the rules state that no one may directly or indirectly influence a series of transactions in any security to create the appearance of active trading, artificially increase the price to induce others to buy, or decrease the price to stimulate sales.

As far as penalties are concerned, the ordinance states that anyone who violates the provisions of Section 17 shall be punishable with imprisonment for a term which may extend to five years or with a fine not less than Rs 5 lakh or with both.

According to the Enforcement Department report, the realized capital gains resulting from the manipulation of IPDC shares by Hyer and his associates amounted to Tk 6.61 crore, with Hyer personally receiving Tk 2.24 crore and his father receiving Tk 4.11 crore.

In terms of unrealized capital gains, Hyer, his wife, his father and DIT cooperative made profits of ₹12.95 crore, ₹2.03 crore, ₹3.28 crore, ₹1.97 crore and ₹1.35 crore, respectively. .

Despite such significant profits from the manipulation, the commission fined Hayer only 1.5 crore Turkish lira.

Moreover, the unrealized capital gain of Haier and his partners as a result of manipulation of shares of NRB Commercial Bank amounted to Tk 23.33 crore. In this case, Konika Afroze, a relative of Hiru, and her accomplices were fined TRY 3.75 crore.

Abul Kalam Mathber and his associates made a profit of Tk 14.35 crore by manipulating One Bank shares, while unrealized profit also amounted to Tk 14.35 crore. Matber and his accomplices were fined 3 million tenge.

Hiru’s wife Sadiya Hassan and her partners made a capital gain of Tk 1.88 crore by manipulating Green Delta Insurance shares, with an unrealized profit of Tk 57 lakh. For violating share trading laws, Sadiya Hasan and her associates were fined Rs 42 lakh.

Hayer’s name has also been linked to the manipulation of Dhaka Insurance shares. He made a capital gain of Tk 4.36 crore by buying and selling shares through his own and his wife’s BO accounts, with an unrealized gain of Tk 95 million. Sadia Hasan and her associates were fined Rs 95 lakh for violating share trading laws.

Hiru was also fined for manipulating Asia Insurance Ltd shares. The Desh Ideal Trust cooperative, of which Hiru is the managing director, made a profit of Tk 3.24 crore from stock manipulation in the insurance sector, with an unrealized profit of Tk 5.24 crore. crore. Desh Ideal was fined Rs 72 lakh by the commission for its involvement in stock manipulation.

The realized capital gain of Matber and his partners as a result of manipulation of Fortune Shoes shares was Tk 6.13 crore, while the unrealized capital gain was Tk 23.89 crore. The commission fined Matber and his associates Tk 1.50 crore for violating securities laws and engaging in manipulation.

The commission also fined DIT Co-Operative Ltd and its partners Rs 55 lakh for manipulating shares of BDCOM Online. The realized capital gain from this manipulation was TRY 1.70 crore and the unrealized gain was TRY 2.71 crore.

In addition, the commission found that DIT Co-Operative and Sadia were involved in the manipulation of shares of the National Insurance Company of Bangladesh. As a result, the commission fined the DIT cooperative KZT 35 million, and Sadia and her accomplices – KZT 1.40 million.