The Bangladesh Securities and Exchange Commission (BSEC) has published a draft of the new “Margin Rules (Repealed), 2025”, which is designed to safeguard investors in the capital market. Under the new regulations, an investor must maintain an average investment of at least Tk 5 lakh annually to qualify for a margin loan for purchasing shares.

The draft, issued on Tuesday (August 19), indicates that individuals without a steady income source, such as students, housewives, and retirees, will no longer be eligible for margin loans. BSEC asserts that it is inappropriate to expose such investors to risk due to their limited financial means. The commission has allowed until September 3 for public feedback on the proposed rules.

The draft outlines several key regulations concerning margin loans. Margin loans will be available exclusively to individual investors, not on a joint or cash basis. The margin agreement will last for one year and can be renewed with mutual consent. Margins cannot be extended against unrealized gains. Additionally, margin loans may only be utilized for purchasing securities; cash withdrawals or transfers are prohibited.

Margin loan ratios have been established based on portfolio size. A margin ratio of 1:0.5 will be applied for portfolios ranging from Tk 5 lakh to Tk 10 lakh, while a ratio of 1:1 will apply to portfolios exceeding Tk 10 lakh. Margins will only be applicable to securities with a free float market capitalization exceeding Tk 50 crore.

Certain shares will be deemed ineligible for margin loans. These include shares with a trailing PE ratio above 30; shares from companies with significant misstatements in their audited financial statements, those facing going concern risks, or those that are closed; shares categorized as “B” or “Z”; and shares from SME, ATB, or OTC boards.

A margin loan will only be granted when the investor’s consistent source of income has been confirmed. The income certificate, pay stub, bank statement, and TIN (Taxpayer Identification Number) will all be examined as part of this verification. Anyone who gives misleading information will face legal punishment.

The investor’s equity must always equal at least 75% of the margin or 175% of the total value of the portfolio. The brokerage firm will issue a margin call if this ratio drops below. The shares may be sold with seven days’ notice if the margin call is unsuccessful three times in a row. However, the shares may be sold at any time without prior warning if the investor’s equity drops below 50%.