BSEC to extend time for inspecting RACE-operated mutual funds' assets

The Bangladesh Securities and Exchange Commission (BSEC) is extending time for looking into the assets of mutual funds managed by the Bangladesh RACE Management PCL, a mutual fund asset management company.

In January, the stock market regulator formed three separate committees to inspect the assets of three fund managers – Race Asset Management, LR Global Bangladesh, and ICB Asset Management. The committees are ordered to submit reports within a month.

According to Mohammad Rezaul Karim, executive director and spokesperson of the BSEC, the inspection period of RACE assets is being extended by another month as per the request of the committee. 

He, however, could not say anything about the inspection of the other two fund managers.

A senior official of the commission, on condition of anonymity, told The Business Standard that the inspection time of ICB Asset Management's assets will also be extended.

The BSEC formed the committees after a report emerged saying that UFS Asset Management had embezzled Tk158 crore from investors' funds.

Syed Hamza Alamgir, managing director of the company, embezzled the money by showing false reports of assets and fled abroad.

Following this incident, the commission decided to inspect asset management companies operating other mutual funds.

There are various allegations about mutual fund misappropriation through unit sales and a lack of good governance and transparency which created mistrust among shareholders of mutual funds.

RACE currently manages 12 mutual funds, of which 10 are Closed-End funds and two are Open-End funds. These funds have more than Tk2,000 crores of assets.

According to the terms of reference of the committee for RACE, the committee will scrutinise the company-managed mutual funds utilised in Fixed Deposit Receipts (FDRs) at banks and non-bank financial institutions (NBFIs) and the funds invested in various securities.

The committee will also examine the overstatement of Net asset value at the fair value of funds and ascertain the overstatement of cash operating expenses, particularly asset management fees, charged against the funds from the inception and present dates.

The committee will collect information on dividends, the actual payment of dividends and the status of unclaimed dividends for each mutual fund and across financial information, and report on acquisition costs, fair value and shortfall on provision for diminution in fair value of investments in traded securities, actual returns of on investment and current status of those investments from the inception and present dates.

The committee will also report on investment in unlisted securities, returns on investment, the role of the CEO or MD to comply with securities laws, and the role of external auditors, trustee and custodian in governance and oversight of the mutual funds.