The Securities and Exchange Commission Tuesday ordered suspension of trading or transfer of shares of the sponsors or directors of ‘Z’ category companies from today (Wednesday) until further instruction.

Sponsors or directors of ‘Z’ category banks, non-bank financial institutions and insurance companies, however, will remain out of the purview of the directive, said Farhad Ahmed, executive director of the SEC.

‘We have issued orders to the Dhaka and the Chittagong stock exchanges and the ‘Z’ categories companies to keep suspended trading or transfer of sponsors or directors’ shares of the low-profile securities,’ he told the reporters.

He said the step was the commission’s initial move for implementing the 2002 notification, which gives the commission authority to discipline the defaulting companies listed on the bourses.

‘We have given waiver ‘Z’ category financial institutions and insurance companies to the directive as the commission thinks that these issues remain in the category for ‘technicalities’ and there are scopes for their improvement,’ he explained.

He said the commission suspended trade and transfer of the sponsors or directors’ shares of ‘Z’ category companies to prevent the sponsors or directors of the low-profile companies from any moves prior to implementation of the notification.

The commission after five years has regained authority to implement the notification as the High Court on December 3 last year vacated its previous stay order on the effectiveness of the SEC notification, he said.

In August, 2002, the commission notified companies with weak fundamentals grouped under ‘Z’ category for a continuous period of one year or more that they would see their boards dissolved and have to reconstitute those in six months.

But the notification was challenged by a company, which obtained a stay order from the High Court, leading to the suspension of the SEC authority over company boards for the last five years.

He said lifting of the stay order cleared the way for the SEC to retain its control over the boards of ‘Z’ category companies which fail to improve their status.

Under the notification, the commission can give a six-month ultimatum to errant companies to improve their situation or, in default, to reconstitute their boards by holding extra-ordinary general meetings.

Farhad said the commission on Tuesday decided that the six-month period would start from the day of the higher court vacation order.

Under the notification, the SEC can also dissolve the boards of directors and constitute new boards by involving general and institutional shareholders.

The new boards would be given a maximum of 24 months’ time to improve the situation of the companies. In default, the companies would face liquidation in six months, the SEC official said.

Currently, 100 securities are being traded under the ‘Z’ category on the bourses, he said.

‘The implementation of the notification will certainly help improve the situation of the low-profile companies and the capital market as a whole,’ he added.

Meanwhile, the Dhaka Stock Exchange on Tuesday halted the shares of Petro Synthetic and Chic Tex Ltd, two ‘Z’ category shares, until further order as DSE investigation teams found that the assets of the companies had been sold to another companies and the listed companies did not inform the matter to the bourse.

‘We have halted the share trading of the companies and informed the matter to the SEC for its suggestions,’ said Salahuddin Ahmed Khan, chief executive officer of the DSE.

He said an investigation team revealed that the assets of Petro Synthetic Products Ltd had been sold to another company which the company did not inform to DSE.

Another investigation team has revealed that the assets of Chic Tex Ltd has been sold by a bank due to loan default which the company did not inform to DSE, he said.