The Bangladesh Securities and Exchange Commission (BSEC) has launched an investigation into the sale of shares from the accounts of five investors in Malek Spinning Mills PLC after the investors denied authorising the transactions.

The investigation also follows conflicting statements from merchant bank First Security Islami Capital and Investment Limited and its panel broker, City Brokerage Limited, over who instructed the share sales.

According to a BSEC investigation order issued on October 18, City Brokerage claimed it had received instructions to sell the shares from First Security Islami Capital. The merchant bank, however, denied issuing such instructions, while the five investors also said they had not authorised the sales.

The regulator has initiated the probe to establish the facts surrounding the transactions.

Investigators will compare the original share-sale instruction documents retained by First Security Islami Capital with the documents submitted by City Brokerage. They will also verify the signatures and examine whether the documents were prepared at the time of the transactions or were subsequently forged, altered or backdated.

The investigation will cover the transfer of shares and the flow of proceeds from the sales. Investigators will also examine how First Security Islami Capital supplied the shares for settlement despite denying that it had instructed the sales.

The committee will further determine whether the proceeds were adjusted against margin loan liabilities and whether any lock-in restrictions applied to the shares.

BSEC Additional Director Md Saiful Islam, Assistant Director Mohammad Nuruzzaman and Dhaka Stock Exchange (DSE) Manager Md Saiful Islam have been assigned to conduct the investigation. The committee has been asked to submit its report within 60 working days.

The investigation will determine whether any irregularities or regulatory violations occurred, assess the extent of any financial losses and recommend appropriate regulatory or legal action.

The investigation order does not establish wrongdoing by any party. Findings and responsibility will be determined based on the outcome of the probe.