Bangladesh Bank on Monday allowed non-resident or foreign investors to make investments in alternative investment funds with a view to widening the scope for foreign investment in the country.
To this end, the central bank on the day issued a circular stating that the AIFs must be registered with the Bangladesh Securities and Exchange Commission to attain foreign investments.
Under the existing rules, non-residents are also allowed to make direct investments or portfolio investments in Bangladesh.
Monday’s BB circular, however, said that eligible investors in terms of the BSEC (Alternative Investment) Rules, 2015 might invest in units of the AIFs registered with the BSEC.
The transactions related to such investments may be made through non-resident investor’s taka account with Bangladeshi banks, it said.
The payment against purchase of AIF units by eligible non-resident investors must be made by inward remittance through the normal banking channels including by debit to NITAs, permissible FC accounts, non-resident taka accounts (Vostro) of overseas branches and corresponding NRTA, the BB circular said.
BB’s foreign exchange investment department must be informed within 14 days of issuance, transfer or redemption of units of AIFs in favour of non-residents or by non-resident investors with necessary documents.
Payment on account of dividend may be remittable abroad and/or may be credited to NITAs, permissible FC accounts, NRTAs (Vostro) of overseas branches and correspondents subject to deduction of applicable taxes, duties/levies, commission etc.
Foreign investors holding units of AIFs would be allowed to sell or transfer or redeem the units as per rules or directions issued by the BSEC.
Fair value of sale proceeds of units will be remittable abroad and/or may be credited to NITA subject to prior approval of the BB.
For getting approval from the BB, a valuation report prepared by a merchant banker licensed by the BSEC or chartered accountant experienced in valuation along with a recommendation from trustee of the AIF concerned will have to be submitted, among other documents, with the application.
The capital market regulator allows formation of AIFs under the Bangladesh Securities and Exchange Commission (Alternative Investment) Rules, 2015.
Under the rules, the minimum size of such fund, which allows firms having fund shortage to raise funds from the capital market, must be Tk 10 crore and the fund has no upper limit of its size.
Formation of the fund also allows pooling funds for the private equity and venture capital having limited capacity to raise funds from the capital market.
Fund managers having licence of the BSEC are allowed to operate such funds that pool funds from the eligible investors including Bangladeshi, foreigner and non-resident Bangladeshi by issuing units of the fund.
At least 75 per cent of the fund must be invested in non-listed securities while maximum 25 per cent of the fund could be invested in listed securities and units of alternative funds managed by other fund managers.
The funds are formed for a specific period of five to 15 years and all investments remain locked for a period of three years from the date of the issuance of the units.
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