The consultative committee of the Securities and Exchange Commission (SEC) has recommended that the market regulator set a uniform face value of shares at Tk 10. The investors often compare the prices of one stock with another, although they do not have the same face value. For this, share prices, even of weak companies, often go up abnormally, ultimately upsetting the market, officials said. The committee recommended that the listed companies, whose annual general meetings are close, should split their share prices in upcoming AGMs. Titas Gas, DESCO and Powergrid will hold their AGMs soon. The committee also proposed fixing a common market lot of 250 shares or shares worth Tk 2,500. The committee however made a proposal not to split the per unit price of AIMS First Mutual Fund, the lone security with Tk 1 face value. A stock does not change the revenue or assets of a company. So, stock-split should cause no change in price other than the adjustment warranted by the split factor. There should also be no change in distribution of stock returns around ex-dates of stock splits. However, experiences from different developed markets, for instance, Canada, Hong Kong, Sweden, Germany, and South-Africa show that significant positive abnormal returns, and increase in variance and volumes of trade have been documented around stock split announcements as well as ex-days. Studies of US stock splits also reported significant positive abnormal returns around the split announcement day. In the US researches show that splitting firms experience about 7-8% excess returns during one year after the announcement of the stock splits. Professor Maloney and Mulherin provide evidence that the ex-day positive price reaction is due to a temporary order imbalance caused by a surge of buy orders as new investors are attracted to the splitting stock. Furthermore, share price volatility, as a measure of liquidity, has been shown to increase following a stock split. Ohlson and Penman find a change in volatility around 28% subsequent to the ex-dates of stock split. The number of trades per day has also been found to increase following stock splits. Researches also find a widening of the bid-ask spread as a percent of price following stock splits. Even if the spread remains the same after a stock split, shareholders will lose twice as much to the spread than before the split. In practice these spreads most likely would not double after the split, but they might increase 20 percent or more. You could end up paying more to trade the stock. Besides, stock split could also negatively effect the composition of the ownership structure as the number of small shareholders increases after the split. Different research finds clear evidence that after split institutional ownership increases, rather than decreases. That means in the long-run, given Bangladesh's perspective, due to split, small investors' interest in the firm will not be preserved. For the same reason, (i.e., a divergence in face value "only misleads" investors). The Indian Ministry of Finance issued a guideline in February 1981 that denomination of equity shares be fixed uniformly at Rs 10 and that the denomination of the then existing shares other than Rs 10 be converted into denomination of Rs 10. In another guideline in January 1983, the Indian government clarified that denomination of shares of Rs 100 need not be changed to denomination of Rs 10. In other words, shares of all companies were required to be in denominations of Rs 10 or Rs 100 only. Even so, several companies converted the denomination of shares of Rs 100 into that of Rs 10 on the ground that it generated better liquidity, as also a higher value for the shares. However, in March 1999, Securities and Exchange Board of India (SEBI) decided "with the objective of broadening the investors' base" to dispense with the requirement of standard denomination of Rs 100 or Rs 10 and give freedom to companies to issue shares of any denomination but not below Re 1. Companies which have issued shares with the face value of Rs 10 or Rs 100 were also permitted to avail of this facility by consolidation or splitting their existing shares. As a result of the above decision, a number of existing listed companies having denomination of Rs 100 or Rs 10 have split their shares mainly into denominations of Re 1, Rs 2 or Rs 5, etc, for no rhyme or reason. What was the result of the uniform face value in the Indian market? The empirical evidence from the neighbouring Indian markets indicates that price and returns decrease significantly after the split. The volatility of the stocks also increases after the split. Further, the splits lead to a greater liquidity, which is measured by an increase in daily number of shares traded, daily value of shares traded, and daily volume turnover. The stock split has most likely increased the cost of trading the shares. Thus, the shareholder's wealth has declined after the splits. Splits do, however, achieve the managerial objective of an increase in the number of shareholders. Though stockholders wealth had declined in the Indian market, stock split ensured substantial profit to market makers, i.e., brokerage houses. Due to the increased number of share trading and higher bid-ask spread brokerage, brokerage firms will be able to make larger profits when their customers buy and sell the stocks involved. Hence, to make tons of money, brokerage firms do recommend split stocks. If still stock split is necessary, SEC should recommend Tk 1 as the uniform face value instead of Tk 10 since fractionalisation beyond tk 1 is not possible. If uniform face value is set at tk 1, companies will not be able to play around by splitting the face value at regular intervals to increase the price of their stocks. Moreover, SEC also needs to assure that they wouldn't allow any firm to split the face value lower than Tk 10 in future. It also needs to ensure the market that it would not get back to the past culture of different face values. Before giving its decision, SEC didn't do any study about the impact of uniform face value on the capital market of Bangladesh. How many people really get confused about the different face value thing? SEC says that most of the investors are not savvy enough to compare stocks with different face values and thus make wrong choices. If an investor does not understand the concept of different face values, he should not be allowed to take his own investment decision. Investment is an art. Small investors should seek investment advice from professional investment advisors. SEC should better ensure that investors from every corner of the society have access to professional investment advisors. Meanwhile, SEC should focus on other issues, for instance, ensuring smooth flow of information, to make the market more favourable for the small investors rather than doing a uniform face value without any rigorous feasibility study. Surely SEC needs to do a study to find the impact of split in the market in Bangladesh, as at the end of the day our shareholder's wealth could also decrease like India. However, whatever happens to the stockholders, surely brokerage houses in Bangladesh is going to make tons of money ahead. Doesn't SEC's decision of uniform face value show that SEC hardly cares about small investors? Does SEC want to make more records in terms of amount of transactions? Or does SEC want to sell more brokerage licenses in the market to increase its revenue? Without any discussion with the respective interest group, SEC's decision to ask listed firms to make a uniform face value of Tk 10 surely raises questions about SEC's motive. Wasn't SEC created to preserve the interest of the investors rather than brokerages houses?