Eight Age-Old Mutual Funds
ICB submits fresh time-extension plea to BSEC twisting proposal
The Investment Corporation of Bangladesh has submitted a fresh proposal to the capital market regulator, seeking another 10-year extension of the tenure of the eight age-old mutual funds it manages. Officials of the Bangladesh Securities and Exchange Commission said the state-owned investment firm made the appeal citing reason that it would restructure the management of the funds.
The ICB, a statutory body, took the decision at its board meeting held on January 22 despite the fact that the BSEC earlier in November last year directed the entity to convert the close-ended mutual funds to open-ended ones or to go for liquidation phase by phase within December 2016 starting from March this year.
As per the mutual funds rules, the tenure of close-ended mutual funds would not exceed 10 years.
Despite the legal bar, the eight ICB-run mutual funds have been trading at the Dhaka Stock Exchange for 18-34 years.
The ICB following its board’s decision sent a proposal to the BSEC last week stating that the proposal was set and the decision was taken as per suggestion given by the commission at a meeting with the ICB management on January 7 this year.
BSEC officials, however, said the ICB misinterpreted the regulator’s suggestion in its proposal and said it had asked the ICB to submit its proposals if there was any alternative in the legal framework.
The corporation in its proposal said that formation process of the ICB-run mutual funds was different compared with that of the other mutual funds listed with the capital market as the funds were launched in 1980-1997.
Considering the negative impact of any ICB-run mutual fund’s liquidation, the ICB board decided to restructure the mutual funds’ management in line with the existing mutual fund rules.
Under the restructure process, the ICB will be the trustee and custodian of the funds, while ICB Asset Management Company will play the rule of asset manger instead of the ICB.
In case of management change the tenure of the MFs will be another ten years from the date of handover.
The eight mutual funds allow the ICB to play a major role in terms of keeping control over the market and the ICB gets substantial amount of management fees from the mutual funds yearly, BSEC officials said.
The commission has yet to think to allow the ICB to extend its MFs’ tenure as a court order is in place that had asked all the regulators to ensure equal treatment to public and private entities.
The commission had earlier rejected proposal of AIMS of Bangladesh for tenure extension for two mutual funds the private sector entity runs.
The BSEC in November last year rejected an ICB’s proposal for ten-year time extension for its eight mutual funds.
The commission also asked the ICB to close all its eight mutual funds one by one in three-month interval starting with First ICB Mutual Fund from March 31, 2015.
The commission at the same time also warned the state-run investment entity for not to act in accordance with a BSEC order that had asked the entity to abolish or convert all the eight mutual funds by December 31, 2014, BSEC officials said.
As per the earlier BSEC direction, the ICB has to close First ICB Mutual Fund within March 31, 2015, Second ICB Mutual Fund within June 30, Third ICB Mutual Fund within September 30 and Fourth ICB Mutual Fund by December 31, 2015.
In line with that, Fifth ICB Mutual Fund has to be closed within March 31, 2016, Sixth ICB Mutual Fund by June 30, 2016, Seventh ICB Mutual Fund by September 30, 2016 and the Eighth ICB Mutual Fund will be abolished within December 31, 2016.
The question of tenure extension came into light in 2009 when the BSEC asked the mutual funds, without any maturity period and passed 10 years after listing, to pull them out from the market by December 2011.
Since the issuance of the directive, the BSEC in three phases extended tenure of the ICB-run close-ended mutual funds by three years following instructions from the finance ministry.
Last time in 2013, the BSEC, after extending the tenure of the ICB-run eight mutual funds by one year, asked the ICB to complete all the relevant procedures for conversion or abolishment of the mutual funds within December 31, 2014.
In 2014, AIMS of Bangladesh for its two mutual funds and the ICB for its eight mutual funds sought BSEC permission to extend the funds’ tenure by 10 years.
In 2013, the ICB had also filed an application with the BSEC to merge its nine close-ended mutual funds with the Bangladesh Fund, but the commission rejected the plea as no rules permit such merger.
The AIMS-managed two mutual funds are AIMS First Guaranteed Mutual Fund formed in 2000 and Grameen One: First Scheme of Grameen Mutual Fund One formed in 2005.
-With New Age input
