BSEC eases mutual fund custodian rules for foreign banks

The Bangladesh Securities and Exchange Commission (BSEC) has resolved a technical bottleneck that had been hampering foreign-owned banks serving as custodians for mutual funds.

However, the regulator has now allowed local management committees at these banks to authorise signatories for mutual fund bank and securities accounts, addressing a structural mismatch between BSEC rules and how multinational banks are organised.

Under the BSEC (Mutual Fund) Rules, 2025, signatories for mutual fund accounts were required to be nominated by the custodian's board of directors. But many foreign-owned banks operating in Bangladesh do not maintain a local board, given their global corporate structures.

Instead, their Bangladesh operations are typically overseen by a "Management Committee" or designated "Nominated Persons," who function as the highest local decision-making authority in the absence of a board.

The BSEC's move brings the rule in line with this reality, clearing the way for these banks to continue operating as custodians without the earlier procedural hurdle.

Recognizing this practical difficulty, the regulator issued a directive today (13 August) to ensure the smooth implementation of the 2025 Rules while safeguarding investor interests. The directive comes into force immediately.

The BSEC stated that for foreign-owned banks, the management committee or designated authorities will now be legally empowered to act on behalf of a board of directors to nominate signatories.

Market insiders noted that this move provides much-needed regulatory clarity for international banks—such as Standard Chartered and HSBC, which play a significant role as custodians in the country's capital market. 

By aligning the law with the operational reality of multinational banks, the BSEC aims to ensure that mutual fund operations remain uninterrupted and compliant with the updated regulatory framework.