The LR Global Bangladesh Asset Management Company Ltd has filed a writ petition with the High Court, seeking an order to stop its removal attempt as the asset manager of two closed-end mutual funds namely DBH 1st Mutual Fund and Green Delta Mutual Fund.
Deputy Attorney General Tushar Kanti Roy confirmed to The Business Standard that the hearing on the writ petition is scheduled to be held on Monday.
The writ petition mentioned the Bangladesh Securities and Exchange Commission (BSEC) as a respondent along with its two executive directors responsible for surveillance, and mutual fund and special purpose vehicle departments, and the trustee of the two funds Bangladesh General Insurance Company Ltd.
BSEC spokesperson and Executive Director Md Saifur Rahman told The Business Standard, "I am yet to find any copy of the legal papers. But the commission will place its arguments before the court, and the BSEC's legal wing is working on it.
The writ petition filed on November 4, 2019, with the High Court Division has also sought a rule nisi to the securities regulator to respond to the LR's recent complaints against some of its competitors who are also majority unitholders of the two listed mutual fund units.
"A few weeks ago, our client LR Global Bangladesh Asset Management Company had officially complained to the BSEC against some market players' manipulative activities in the two funds' units. But the regulator did not respond to that. So we are seeking for court's interference for a remedy," said the petitioner's lawyer Advocate Mohammad Arshadur Rouf.
Seeking anonymity, BSEC surveillance officials, on the other hand, told The Business Standard as the issue is in court now, "We have scrutinised the complaints made by the LR Global but did not find it to be true."
"We rather should call the asset manager a litigious one, and they are going to the court only to retain the business of managing the two funds."
In the writ petition, the LR global has sought an order to the trustee of the two funds from the BSEC that would help stop the replacement of the asset manager.
The asset manager mentioned the cardinal principle of law in its writ petition which would help it to be in a position not be replaced without an opportunity to defend itself.
A BSEC legal official opined that the court will hear on the matter. But according to the mutual fund rules, to remove the LR Global, the trustee does not need to provide the asset manager with any such opportunity as the removal attempt is a request from the majority of the unitholders, not a BSEC attempt.
According to the rule 31 (2) of the Bangladesh Securities and Exchange Commission (Mutual Fund) Rules 2001, if owners of over two-thirds of the fund units want, the trustee can replace an asset manager with a prior approval from the BSEC and the trustee have to inform the commission within three working days of the removal.
The next section, rule 31 (3) of the same rules said the regulator also can remove an asset manager or its chief executive, if it is necessary to protect the public interest. In that case, the asset manager or its CEO must be allowed to exercise its right to defend it or him or herself.
Over 70 percent of the unit owners of DBH 1st Mutual Fund and Green Delta Mutual Fund in the last week of October had written to the trustee to remove the LR Global as the asset manager of their fund and appoint IDLC Asset Management as the new one. Sponsors of both the fund were also among the said signatories.
Ahmed Saifuddin, the CEO of the trustee company BGIC, was not available over the phone as he is travelling abroad.