BSEC initiates fresh move to finalise MF rule change

Staff Correspondent | Published: 01:57, Apr 16,2017

 
 

Bangladesh Securities and Exchange Commission has initiated a fresh move to publish the draft rules on mutual fund that were stuck up for almost one-and-a-half-year after finalising the draft.
A BSEC official told New Age that the commission recently took the initiative as part of its move to clear a number issues which were remaining pending for long.
After disclosing the draft rules in national dailies, those would be finalised for publishing in government gazette notification based on public opinion, the official said.
Once the gazette notification is published, asset management companies will have to follow the rules to operate mutual funds, he said.
The stock market regulator at a meeting on December 7, 2015 finalised the draft Securities and Exchange Commission (Mutual Fund) Rules, 2001.
The BSEC in an amendment to the mutual fund rules in 2013 allowed mutual funds to issue re-investment units besides cash dividend.
In 2015, the commission initiated a move to amend the rules mainly to close the scope for issuing re-investment units or stock dividend as issuance of such dividend caused heavy losses for investors.
Besides the losses, prices of the units of 13 mutual funds which had declared RIUs in 2015 depreciated after the announcement of the dividend and before their respective record dates.
Under the proposed amendment, the BSEC will specify the circumstances when RIUs can be issued to investors so that no loss is caused for the unit holders.
The BSEC’s delay in finalising the amended rules gave a number of mutual funds opportunity to issue RIUs or stock dividend again in 2016.
According to the finalised draft rules, the BSEC will set the time when a mutual fund will be allowed to invest its dividend as re-investment.
A mutual fund will be allowed to declare interim dividend only when there is no provisioning required, while keeping more than 20 per cent of a mutual fund in fixed deposit will be barred.
The finalised draft rules also said that asset manage ment companies would get their fee as per their performance.
If the AMCs fail to pay dividend, their fees will be reduced, but for better performance the AMCs will get bonuses.
The BSEC said the highest tenure of close-ended mutual funds would be 10 years and in order to extend that the mutual funds would have to go for unit-wise voting system.
It also said the mutual funds would have to disclose their NAV on daily basis instead of weekly basis.
The AMCs have to publish their stock market and other investment details on monthly basis on their web sites.
After the market crash in 2010-2011, most of the mutual funds failed to offer dividend to their unit holders that put a negative impact on the overall mutual fund sector.

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