Investor protection by securities regulators in the primary share markets in Australia and Bangladesh: A comparison and contrast

• Published in: Journal of financial crime 2009-10, Vol.16 (4), p.305-333
• Main Author: Solaiman, S.M.
• Format: Article
• Language: English
• Subjects: Initial public offerings; Investors; Regulation; Regulation of financial institutions; Securities markets; Studies
• ISSN: 1359-0790; 1758-7239
• DOI: 10.1108/13590790910993735

Purpose - The purpose of this paper is to discover the weaknesses of initial public offering (IPO) regulation in Bangladesh in the light of the relevant law and practice in Australia. Design/methodology/approach - A qualitative analysis of archival materials has been carried out to achieve the objective of the paper. Two different sets of legal provisions dealing with some selected issues relevant to the regulation primary share markets have been compared and contrasted. The level of market development, composition and performance of securities regulators and the level of investor sophistication have been critically in this paper in discussing aspects of regulation. Findings - This paper finds that the IPO regulation in Bangladesh is weaker than that in Australia. The major weaknesses may be attributed to different factors such as the adoption of the disclosure philosophy prematurely by discarding the previous merit regulation in 1999 for a pre-emerging securities market, lack of experienced and well-trained people in the composition of securities regulators, lack of regulatory authority to sue for compensation on behalf of investors in the absence of shareholders class action, lack of authority to regulate auditors and lawyers who play significant roles in preparing defective prospectuses for public consumption. Findings also suggest that adequate investor protection cannot be ensured by regulatory measures alone, investors should be educated to protect themselves in the first place against the cupidity of issuers. Originality/value - It provides an insight into an effective IPO regulatory regime. An immediate implementation of the recommendations made in this paper may contribute to improving the legal and regulatory regime for the primary share market in Bangladesh which may set a good example for others. [PUBLICATION ABSTRACT]