ICB seeks relief as BSEC tightens pressure on fund registration

Bangladesh Securities and Exchange Commission (BSEC), the capital market regulator, has been strongly pushing up the Investment Corporation of Bangladesh (ICB) to obtain registration for its oldest unit fund in a move to streamline fund monitoring.

Amid the move of the commission, ICB, the state-owned investment banker, sought an exemption on the country's first open-end mutual fund, which was approved by the council of ministers in 1981, according to a letter to the ministry of finance.

With the approval of the council, the fund has been operating under the ICB Unit Fund Regulations, 1981, formulated with the power of Investment Corporation of Bangladesh ordinance, 1976, and did not obtain registration from the commission. 

Now, the capital market regulator BSEC has moved to bring the unit fund under registration to comply with the newly introduced Mutual Fund Rules 2025 as the rules said that no fund can operate without registration and a registered asset manager from the commission.

On 9 April in a letter to the finance ministry, ICB sought exemption from taking registration. 

Meanwhile, the state-owned investment bank, in the letter, expressed fears of negative impacts, including a surge in costs, an increase in unit surrenders, lower dividend payouts, and pressure to repay surrendered units.

The capital market may also face adverse effects if unit surrender surges, ICB must withdraw the invested funds in stocks through share sales to repay unit holders, it fears.

In March, the commission set a 45-day deadline for taking steps to register the fund.

As the required measures were still not taken, the commission later gave another seven days. In a letter issued on 5 May, it said legal action would be taken if no initiative was made within that period. The deadline expired on 12 May.

However, in a letter sent on 11 May, ICB informed the commission that the fund's registration is under policy-level review by the government. It requested more time to take further necessary steps based on decisions from the finance ministry and the government.

According to documents, ICB Unit Fund is a specialised national investment and savings scheme approved by the council of ministers of the government in March 1981.

When the scheme launched with a unit capital of Tk15.84 crore, the fund has now grown to Tk4,909 crore, making it the largest fund in the capital market till date.

Since its inception until 2024-25 fiscal, the fund distributed a total Tk6,087.50 crore dividend. So far, it had paid a maximum dividend of Tk45 per unit and, even under adverse market conditions, recently distributed Tk30 per unit as dividend.

The surrender value of the unit fund, with a face value of Tk100, currently stands at Tk264, according to ICB.

ICB officials said the fund's money has been invested in shares of profitable companies, as well as government-owned companies established under state initiatives with strong profit potential.

They added that the government has also provided direct policy support by including part of its existing shareholdings in several multinational companies within the fund's portfolio.

The government decided to include shares of state-owned enterprises in the fund's portfolio to increase public acceptance and investor confidence.

What ICB told the ministry

Following the regulator's letter on registration, the ICB board discussed the matter and decided to request the Financial Institutions Division of the finance ministry to exempt trust funds from mandatory registration under the newly introduced Mutual Fund Rules.

Based on the board's decision, ICB requested that the ICB Unit Fund be exempted from registration.

In the letter signed by ICB Managing Director Niranjan Chandra Debnath, it was stated that the Unit Fund is a trust-based fund formed through investments from small and medium savers. Like the National Savings Scheme, it is considered an effective and stable savings instrument. ICB itself has no direct investment in the fund.

The letter said most investors in the fund are elderly people seeking stable income. Sudden changes in management or transfer of operations could weaken investor confidence. Registration and separate management costs could also reduce dividends, leading to a rise in unit surrenders.

According to the letter, as of 30 June 2025, the fund held shares worth Tk4,801.65 crore. If securities have to be sold to meet a large number of unit surrenders, it could negatively affect the current capital market and create unexpected pressure.

Regarding higher expenses, the letter said annual costs of the currently unregistered fund are Tk41.24 crore. If registered under the new law, expenses would rise to around Tk78 crore, an increase of 47%, which would reduce returns for unit holders