The High Court on Tuesday declared illegal the Securities and Exchange Commission’s decision not to approve the bonus and rights offers of the AIMS 1st Mutual Fund.
The court also asked the SEC to approve the mutual fund’s proposal for declaring rights and bonus offers for investors within 10 days after receiving application from the fund’s trustees.
The bench of Justice Mamnoon Rahman and Sayeda Afsar Jahan pronounced the verdict after the final hearing of the writ petition filed on March 25 by Md Abdul Hossain, a small investor in the capital market, challenging the SEC’s decision that rejected the AIMS 1st Mutual Fund’s proposal for declaring the rights and bonus as dividend.
The SEC on March 7 rejected a proposal for 70 per cent stock dividends and 130 per cent rights issue for the years of 2007 and 2008 declared by the trustee body of the AIMS 1st Mutual Fund on February 23.
The SEC, after the decision of the trustee board was announced, halted trading of the mutual fund on February 25. The trading of the AIMS was, however, resumed on July 4.
Yawer Sayeed, top official of the asset management firm, AIMS of Bangladesh, told New Age that High Court’s verdict would benefit the investors. ‘We will follow the court’s decision,’ he said.
After Abul Hossain filed the writ petition on March 25, the HC on the same day issued a rule on the SEC to show cause as to why its directive, declining to grant approval for distributing stock dividend and rights issue, should not be declared to have been taken without lawful authority. The court also stayed the operation of the SEC’s directive for three months.
Officials of the Dhaka Stock Exchange said that the SEC first approved AIMS’ rights offer in 2005 although there was no precedent of issuing rights and stock bonuses by any close-end mutual fund in the world.
But when AIMS declared stock dividend for 2007, the SEC rejected the application and amended the regulations for mutual funds, barring close-end mutual funds from issuing stock dividends and rights offers.
After three investors filed a writ petition challenging the amendment, the HC gave a verdict that the mutual funds which were listed before June 2008 could issue stock dividends and rights offers by taking the SEC’s approval.
All the mutual funds, except AIMS, however, declared cash dividends.
