No one expects to bear the consequences of offenses committed by another person. Yet, this is exactly what is happening in the stock market, where investors are suffering due to the wrongdoings of company directors.

A directive issued by the Bangladesh Securities and Exchange Commission (BSEC) in May last year has led to this situation.

According to the regulatory directive, if any company fails to distribute at least 80 percent of its declared dividends, it will be downgraded to the Z or junk category.

Under this regulation, several companies have been placed in the junk category over the past few months.

While some firms have since completed their dividend disbursements and been upgraded, 19 companies remain in the Z category due to their failure to distribute dividends.

The downgrading has caused stock prices to drop, leading to losses for investors.

Additionally, the settlement period for Z-category stocks is three days, compared to a shorter period for other categories. This means investors must wait at least three days to encash their investments in junk stocks.

However, investor ordeals do not end there.

Stocks downgraded to the Z category become non-marginable. This means that if an investor purchased such shares on margin, they must deposit funds against the loan.

Otherwise, brokers execute a forced sale, further driving down stock prices and worsening investor losses.

"What offense have investors committed here?" questioned Hasanul Bannah, a stock investor. "If there was any wrongdoing by the company, the punishment should be faced by the company's top officials or board members."

"If a company does not have adequate cash, why does it announce dividends? There must be some ill intention on the part of the board. Therefore, the board should be held responsible and accountable," he added.

Meanwhile, Saiful Islam, president of the DSE Brokers Association of Bangladesh, said the BSEC's directives on categorisation have been "misused and abused" by certain groups and listed companies.

"It has become common practice for companies to announce dividends to maintain their category for six months [the timeframe for dividend disbursement]," he said.

During this period, investors risk losses by investing in such companies, Islam noted.

He argued that categorisation has long been a tool for manipulation and that there should not be any categories at all, as is the case in other developed stock exchanges.

Islam believes that investors should make investment decisions based on a company's portfolio rather than its category.

Under the existing system, the brokers association president proposed that the BSEC amend its directive to penalise board members instead of investors.

Mazeda Khatun, president of the Bangladesh Merchant Bankers Association, supported Islam, stating that investors are suffering due to the downgrading.

"The regulator should change the policy to ensure that investors are not unfairly penalised," she added.

Speaking on condition of anonymity, the company secretary of a listed firm said his company's board recommended a dividend despite knowing their cash-strapped position.

However, some companies claim they face difficulties in disbursing dividends due to outdated investor information.

Previously, listed companies did not prioritise updating their records, as they were not scrutinised. However, the recent rules linking dividend disbursement to categorisation have brought this issue to the forefront.