BSEC to tighten monitoring of MFs’ investment in non-listed cos

HM Murtuza | Published: 00:05, Jan 31,2017


The Bangladesh Securities and Exchange Commission has initiated a move to scrutinize all the mutual funds’ investments that they made in non-listed securities.
As part of the move, the commission may seek detailed investments reports of mutual funds, BSEC officials told New Age on Monday.
The BSEC took the initiative with a view to observe whether any mutual funds were investing in non-listed securities in the name of investments in pre-IPO placement shares violating securities rules, they said.
Besides, asset management companies will be verifying whether the investments made in the companies had the commission’s approval in this regard, they said.
The commission in recent times observed that a number of asset management companies were not providing detailed reports on their investments in non-listed securities, a BSEC official said.
As per the securities rules, closed end mutual funds were allowed to invest
up to 60 per cent of their fund size in listed securities including initial public offering and pre-IPO placement shares.
Of the 60 per cent, half of the amount has to be invested in listed securities.
In case of investing in non-listed securities, MFs were only allowed to invest only in those companies which got BSEC’s approval in issuing pre-IPO placement shares.
Closed-end MFs were allowed to invest rest 40 per cent of their fund size in entities other than capital market instruments.
Some of the companies even did not provide the name of the non-listed companies in which the investments were made although AMCs are bound to provide detailed reports on quarterly basis, he said.
‘We have noticed such inappropriate reporting of MFs while scrutinizing quarterly investments reports of a number of MFs,’ he added.
Investments by MFs in non-listed securities in violation of securities rules first came into light in 2010 when the commission found LR Global Bangladesh Asset Management Company’s Tk 46.39 crore investments in non-listed companies from the mutual funds run by LR Global in violation of rules.
Based on the finding, the commission fined LR Global Bangladesh Asset Management Company Tk 50 lakh, while Bangladesh General Insurance Company, trustee of LR Global-managed mutual funds, Tk 25 lakh, Hoda Vasi Chowdhury, auditor of LR Global, Tk 5 lakh.
The capital market regulator also barred LR Global from forming any fresh fund for one year. 

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