Mutual funds marginable, clarifies regulator

Listed mutual funds are marginable and this facility is effective since 30 December 2010, says the Bangladesh Securities and Exchange Commission (BSEC) in a statement.  

Investors currently enjoy margin loan facilities on mutual funds as listed securities in the stock exchanges, but the securities regulator has given a clarification in this regard in the wake of recent market rumours.

The commission said margin loan facilities on mutual funds had continued earlier till 26 October 2009. The commission resumed the facility on 30 December 2010, which is still in force in the stock exchanges.

Merchant banks and brokerage firms currently provide margin loans to their customers at a ratio of 1:0.5.

Recently, the commission formed a committee to investigate the abnormal increase in unit prices of five listed mutual funds.

The unit prices of 37 listed mutual funds increased by 4-119%, and the committee picked the five which witnessed over 50% gain over the last one month.

The committee will investigate if there are any irregularities in trading of the funds' units in the stock market and will submit its findings within 30 working days.

If the committee finds any proof of price manipulation, the guilty ones will face the music.

Most of the listed mutual funds with their legacy of underperformance, a lack of governance within many, zig-zag in regulations, and series of litigations had almost lost the confidence of investors over the last decade.

The new leadership at the securities regulator has started addressing issues within the sector in recent months.

The commission's chairman in various forum discussions expressed his hope that if governance and skilled asset management are ensured mutual funds have the potential to attract non-expert investors' money that is sitting idle in bank accounts.

Meanwhile, the market seems to have turned over-enthusiastic and prices of many mutual fund units have begun to increase at an insane pace, regardless of their valuation.