Customers lose Tk 100cr in Salta Capital embezzlement

Stock brokerage firm Salta Capital Limited has been accused of embezzling around Tk 100 crore in client funds and shares, according to an investigation by the Bangladesh Securities and Exchange Commission (BSEC).

The firm withdrew about Tk 27 crore from its consolidated customer account (CCA). It also embezzled another Tk 72 crore by selling shares from customers’ BO (beneficial owner) accounts, according to BSEC officials familiar with the investigation.

The stock market regulator is now preparing legal action against the brokerage house, the officials said. However, Salta Capital’s managing director and chief executive officer have gone into hiding.

Salta Capital is a member of both the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE). It has nearly 14,000 customers. The DSE is currently assessing how many clients have been affected and the extent of their losses.

Although similar incidents of embezzlement of client funds and shares have occurred in the past, market participants say the regulator has failed to take sufficient action.

According to officials involved in the investigation, Salta Capital used multiple fake versions of back-office software to carry out the fraud.

They said the brokerage house showed one set of data to the stock exchanges while using another version of the software to mislead customers. As a result, the money and share balances customers saw in their BO accounts were entirely fictitious.

According to BSEC officials, outdated mobile phone numbers and email addresses of many customers were among the factors that also allowed the irregularities to go unnoticed.

In February this year, the DSE conducted an initial investigation after detecting the irregularities and submitted a report to the BSEC. The regulator later carried out the full investigation.

Md Abul Kalam, spokesperson for the BSEC, said the regulator is proceeding with legal action.

“All BO accounts and bank accounts of the directors of this brokerage house have already been frozen,” he said.

The spokesperson said the regulator has instructed the DSE and CSE to determine the shortfall in investors’ funds and shares, and arrange their return.

He added that the stock exchanges are being empowered to carry out all necessary monitoring and surveillance of brokerage houses’ consolidated customer accounts.

SIMILAR SCANDALS HAVE HAPPENED BEFORE

Over the years, several stockbrokers have been involved in similar embezzlements.

Since 2020, four brokerage houses -- Moshihor Securities, Banco Securities, Crest Securities and Tamha Securities -- have collectively embezzled around Tk 270 crore.

In 2005 and 2006, the DSE suspended the trading activities of five brokers over similar irregularities and later sold their licences to compensate investors.

The brokers were Capital Roops, JR Capital Company, MR Company, T Mushfu & Company and SPM Ltd.

However, in many cases, affected clients did not recover their full investments.

Nuzhat Anwar, managing director of the DSE, said the exchange will appoint an auditor to conduct a forensic audit to determine the actual financial condition of the brokerage house and identify affected investors and their losses.

“This is highly embarrassing for the DSE and detrimental to investor confidence.”

“The audit will be conducted to ensure no false claims are made, and the entire process remains transparent. Only after that will the investors’ money be returned. This cannot actually be done overnight, but we will try to complete the work as quickly as possible,” she said.

M Shaifur Rahman Mazumdar, managing director of the CSE, said, “Initially, we are facilitating the transfer of shares for investors who currently hold shares in that house and wish to transfer them.”

After that, the exchange will assess the total financial losses, account deficits, remaining assets and the value of the brokerage licence to determine how investors can be compensated, he told The Daily Star.

“As of now, we do not have a specific source from which to finance the money. We will work with the highest priority on investor protection, though completing the entire process will take some time,” Mazumdar added.

Meanwhile, Saiful Islam, president of the DSE Brokers Association of Bangladesh (DBA), said incidents of this nature are a matter of shame for all of them.

“This is not the first time it has happened, so why does it keep occurring repeatedly? It is possible that someone from each regulatory body might be involved. Yet, none of them has been brought to justice so far,” he said.

He said those responsible must also be held accountable and punished.

“Unless this type of embezzlement is stopped, investor confidence will not return regardless of how much work is done to improve the market,” he added.

The Daily Star attempted to contact Abu Sayed Md Shahidullah, managing director of Salta Capital, Mohammed Rezaul Karim, chief executive officer of the firm, and director Mohd Shahajahan Iqbal for comment, but all of their mobile phones were switched off.

DSE PLANS REAL-TIME MONITORING OF BROKERAGE ACCOUNTS

With similar incidents recurring, the DSE has decided to introduce real-time monitoring of brokerage houses’ consolidated customer accounts. Software is currently being developed for the system, according to Nuzhat Anwar.

She said that although such software normally takes about six months to develop, efforts were underway to complete it within three months. If necessary, teams would work in three shifts to meet the deadline.

At present, anomalies can only be detected when a DSE team physically inspects a brokerage house or when problems emerge during the licence renewal process.

She said the DSE currently oversees 278 brokers and Trading Right Entitlement Certificate (TREC) holders. Given the scale of the market, identifying account deficits through manual inspections alone is difficult.

Until the real-time monitoring system is introduced, the exchange will carry out risk-based monitoring over the next three to four months, she added.