The Bangladesh Securities Commission on Wednesday set the upper limit on the interest rate on margin loans granted by securities brokers and investment bankers to investors at 12% with a maximum charge of 3% spread over the cost of funds.

The BSEC made the decision at a committee meeting chaired by its chairman Shibli Rubayat-Ul-Islam, according to a BSEC press release.

He said that stock brokers and investment bankers can charge clients an additional 3% spread just with the cost of the fund compared to the margin loan offer.

However, the total interest rate charge against the margin loan offer should in no case exceed 12 percent.

BSEC officials said many brokerages and investment bankers charge between 15% and 30% interest on margin loans, severely hurting investors.

Intermediaries were fancifully charging interest as there were no rules regarding the matter before, they said.

The regulator at the meeting fined the stock exchange brokerage of Chittagong Skys Securities Limited and the stock exchange brokerage of Dhaka Subvalley Securities Limited Tk 2 lakh each for breaking the rules of margin.

In addition, the regulator also fined Ikbal Hossain, an authorized representative of Subvalley Securities, Tk 1 lakh for executing trades without signing the purchase order.

The BSEC at the meeting also enabled IDLC Finance Limited to issue non-convertible zero coupon bonds worth Tk 500 crore.

The face value of each unit of the bond will be Tk 50 lakh and the bond will be fully redeemable in four years.

Only legal persons, legal persons and other eligible investors will be authorized to subscribe to the bonds by private placement.

The non-bank financial institution will meet its current financial demand with capital.

EC Securities Limited acts as the bond trustee while IDLC Finance Limited is the principal arranger appointed.