The Bangladesh Securities and Exchange Commission is yet to take initiative to finalise the proposed amendment to the mutual fund rules after drafting the changes two years ago, hampering the growth of the sector.
The BSEC approved some new provisions for the amendment at a meeting held on December 7, 2015 and the draft rules were supposed to be published in the national dailies seeking public opinions immediately, but it is yet to happen.
Seeking public opinions is required to give final approval to the amendments.
Market operators said the stock market regulator’s efforts to bring in the changes became questionable due to the long delay in implementing its decision.
As per the proposed provisions, the regulator was supposed to set the time of issuing re-investment units as dividend by mutual funds and the fees of the asset management companies, and trustees were supposed to be restructured.
The BSEC also included the provision of taking regulatory consent for recommending RIUs.
The BSEC in an amendment to the mutual fund rules in 2013 had allowed mutual funds to issue re-investment units alongside cash dividend.
In 2015, the commission, however, backtracked on its early position and took initiative mainly to close the scope for issuing re-investment units or stock dividend by mutual funds.
The BSEC revised its decision as the commission felt that the issuance of such dividend caused heavy losses for investors as more than two-thirds MFs remained below face value due to various reasons including investors’ shaky confidence.
Even if the market witnessed a prolonged bullish trend, the unit prices of the MFs were not seen to cross their face value.
Under the proposed amendments, the BSEC would specify the circumstances when RIUs can be issued to investors so that no loss is caused for the unit holders.
The commission also pegged a condition of cutting the management fees if the AMCs fail to issue dividends while the AMCs would get performance bonus if they could give cash dividends above stipulated rates.
The regulator was also supposed to incorporate a mandatory provision of publishing complete information about the fund for the greater interest of the investors.
The AMCs have to publish their stock market and other investment details on monthly basis on their web sites. Net asset value of the MFs would have to be calculated on daily instead of weekly basis, according to the draft amendments.
As the amendments are yet to come into effect, the AMCs have no legal bar to recommending RIUs and they were seen declaring dividends whimsically.
The performance of many fund managers is not up to the mark and the investment culture is required to restore investors’ confidence in MFs, stockbrokers said.
It was observed in the last six years that only 5-7 MFs provided double-digit dividend while the savings certificates and most of the commercial banks provided around 9 per cent interest for deposit that turned the investors away from the MF sector, they said.
Besides, lack of knowledge of investors and lack of capability and efficiency of the fund managers have been blamed for the dullness in the sector.
Despite knowing the situation, the commission is yet to finalise the amendments, said market operators, adding that the commission was trying to aware investors through financial literacy programme, but failed to reach mass investors.
According to Dhaka Stock Exchange information, a total of 37 closed-end MFs worth Tk 48.76 crore are listed with the bourse, which accounts for one per cent of the total market capitalisation.
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