BSEC removes LR Global from six mutual funds to protect investors
BSEC cites conflict of interest as one fund exceeds 15% shareholding limit.
The Bangladesh Securities and Exchange Commission (BSEC) has removed LR Global Bangladesh Asset Management Company Limited as the asset manager of six mutual funds over regulatory violations and alleged mismanagement.
The decision was approved at a recent board meeting of the commission, according to a disclosure published by the Dhaka Stock Exchange today (2 March).
In a statement, the regulator said the action was taken in the interest of investors and to safeguard public funds after its investigation found breaches of securities laws, violations of the Mutual Fund Rules, 2001, and failure to fulfil fiduciary responsibilities.
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The affected funds are DBH First Mutual Fund, Green Delta Mutual Fund, AIBL First Islamic Mutual Fund, LR Global Bangladesh Mutual Fund-1, NCCBL Mutual Fund-1, and MBL First Mutual Fund.
Trustees of the respective funds have been directed to initiate necessary legal and administrative measures. Meanwhile, the process to cancel LR Global's registration as an asset manager is underway.
According to the BSEC investigation, funds from the six mutual funds were invested in Padma Printers & Colors Limited, later renamed Quest BDC Limited, at prices higher than the approved rate and without adequate financial analysis.
The commission said the investments violated applicable rules and exposed unit holders to significant financial risks.
The regulator also identified a conflict of interest, noting that a related entity purchased shares of the same company at a lower price, depriving mutual fund investors of potential benefits. In one instance, more than 15% of a single company's paid-up capital was acquired from one fund, exceeding regulatory limits.
In addition, the appointment of a managing director at Quest BDC Limited without prior approval from the trustee or the commission was found to be in violation of the rules.
Since 2022, the investment in Quest BDC has yielded no returns. As the company is listed on the OTC market, the shares are illiquid, making it difficult for the closed-end funds to exit the investment.
Trustees are now assessing options to appoint a new asset manager following the completion of required audits.
