The Bangladesh Securities and Exchange Commission has asked the asset management companies (AMCs) to explain on re-investment dividend calculation following investors’ allegation of miscalculation, BSEC sources said. The regulator took the step as some investors who are holding units of different mutual funds (MF) filed complaints with the commission stating the re-investment calculation formula of different mutual funds as ‘fictional’, they said.
A BSEC senior official said that they would also take tough action on Trustees and Custodians of the mutual funds which are not acting properly while taking fees for their services.
‘Trustees and Custodians are assigned to monitor the activities of the asset managers for protecting investors’ interest,’ he said.
Scope of re-investment was created by BSEC rules in a bid to benefit the investors, but not to make them losers, he said.
Investors alleged that in a sense, the declaration of re-investment has cost each unit, in some cases, two times higher than the market prices of the units.
A BSEC letter sent to the AMCs recently also asked the entities to explain whether the re-investment dividends they had declared for the last financial year protected investors’ interest or not, BSEC sources said.
‘The commission is trying its best to bring discipline in the mutual fund sector in a bid to restore investors’ confidence over the sector,’ BSEC executive director Saifur Rahman told New Age on Thursday.
Asked, Aims of Bangladesh, a leading AMC, managing director Yawer Sayeed told New Age on Friday, ‘As the BSEC rules did not mention any re-investment dividend calculation formula, some confusion arises regarding the issue.’
He also said that the BSEC may recommend a calculation formula in this regard to mitigate the confusions.
He, however, said that AIMS of Bangladesh tried to make investors’ beneficiary while making the dividend decisions.
Out of the 41 closed-end mutual funds listed with the capital market, 37 declared dividends for the year ended on June 30, 2014.
Of the 37 mutual funds, 12 declared dividends in the form of re-investment, while the rest declared cash dividends.
The 12 mutual funds are Aims First Mutual Fund (50 per cent), Grameen Mutual Fund One (30 per cent), Grameen One : Scheme Two (15 per cent), First Janata Bank Mutual Fund (12.50 per cent), EXIM Bank First Mutual Fund (12 per cent), Popular Life First Mutual Fund (12 per cent), AB Bank First Mutual Fund (10 per cent), EBL NRB Mutual Fund (10 per cent), First Bangladesh Fixed Income Fund (10 per cent), PHP First Mutual Fund (10 per cent), Trust Bank First Mutual Fund (10 per cent) and IFIC Bank First Mutual Fund (9 per cent).
For example, First Janata Bank Mutual Fund, managed by Race Management PCL, declared 12.50 per cent re-investment as dividend for its unit holders.
Each unit of First Janata Bank MF of face value of Tk 10 was trading between Tk 6.50- Tk 5.30 for the last three months, while the net asset value per unit was shown as Tk 11.30 on August 28, the last disclosed NAV before the record date.
Investors, however, were given units of the mutual fund on the basis of the NAV per unit which was about two times higher than the market price of a unit.
If 12.50 per cent cash dividend was given, investors would have been able to purchase two units of the mutual fund at the prevailing market price, said a written complaint made by Munshi Shafiuddin and 14 others investors and which was submitted to the BSEC and to the Bangladesh General Insurance, trustee of Race Management PCL
-With New Age input
