Majid Eshqi, the head of Iran's Securities and Exchange Organization (SEO), has officially resigned amid a controversy over low-interest loans granted to board members, including himself, EcoIran reported on September 7.

 Eshqi had previously tendered a verbal resignation to the Minister of Economic Affairs and Finance Abdolnasser Hemmati, following the appointment of the new economy minister, but formalised his decision with a written letter on September 7.

Eshqi, appointed as head of the SEO on October 13, 2021, with a majority vote from the Supreme Council of the Securities and Exchange, had his term extended for another 30 months in April 2024. However, just five months into his renewed mandate, Eshqi stepped down, citing the need to give Hemmati the freedom to make structural changes within the capital market’s leadership.

However, the resignation came in the wake of a report published by an Iranian financial media outlet, EcoIran, which revealed that members of the SEO board had granted a collective IRR 105bn ($178,000) in low-interest loans to themselves. The loans, provided at a 4% interest rate and with a 10-year repayment term and secured against a single cheque, were drawn from the organisation’s internal funds. The largest recipient was Eshqi, who reportedly received IRR 27bn ($45,000).

Eshqi has categorically denied allegations of misconduct, stating that the loans were approved under legal frameworks and by the SEO’s Supreme Council. "The claims that the board has approved loans for itself are entirely false," Eshqi said, adding that the benefits were extended to all employees of the SEO, not just the board, ILNA reported.

Nevertheless, the controversy has drawn significant public scrutiny, particularly given the ongoing economic difficulties in Iran. Bank loans in Iran are offered at a minimum interest of 24%, with a repayment period of 36 to 60 months.

Many small investors, who have suffered losses in the market in recent years, have expressed frustration over the revelations. The timing of the loan scandal, coupled with ongoing challenges faced by Iran's banking system—such as difficulties in providing marriage loans—has raised concerns about potential misuse of capital market resources.

Iran's Minister of Economic Affairs and Finance issued a strong statement, asserting that the new administration under President Hemmati, part of Masoud Pezeshkian’s government, is committed to eradicating rent-seeking practices. “We have come to eliminate privileges, and no one will be allowed to exploit public resources,” the minister declared, signalling a tougher stance on financial misconduct.

In the Iranian Parliament, Nezamoddin Mousavi, the spokesperson for the Parliament's Presidium, took a direct swipe at Eshqi. “I mentioned in the parliament before that Mr Eshqi is running the stock exchange 'Ishq' (the Persian word for carelessly). Now it turns out that he has granted himself low-interest loans worth billions from the people’s money,” Mousavi wrote in a statement, echoing the frustration of many investors who feel betrayed by the revelation.

The General Inspection Organisation of Iran (GIO) highlighted the controversial loans in a formal report and raised concerns. The GIO underscored the suspicious nature of these loans, which were extended two weeks after President Ebrahim Raisi’s death.

The organisation pointed out that the timing of the loan approvals coincided with a period of underperformance in the SEO’s management, adding to the concerns about the ethical integrity of the transactions.

The fallout from the controversy was reflected in the Tehran Stock Exchange on September 7, as the main TSE index fell by 7,665 points, closing at 2,101,628.

However, the equal-weight index saw an increase of 1,989 points, finishing at 661,691. On the over-the-counter (Iran Fara Bourse) market, the main index rose by 24 points to 21,260, while the equal-weight index gained 441 points, reaching 114,027.