Trustee asks to freeze on banking and trading activities of LR Global's 6 mutual funds

In an extraordinary move to safeguard investors, the trustee for six mutual funds managed by LR Global Bangladesh Asset Management Company Limited has ordered an immediate halt to all banking transactions and securities trading linked to those funds.

The decision follows sweeping regulatory action by the Bangladesh Securities and Exchange Commission (BSEC) against LR Global and its top executives for alleged financial misconduct.

According to the disclosure filed on the Dhaka Stock Exchange yesterday, the Bangladesh General Insurance Company (BGIC), which serves as the trustee for these six closed-end mutual funds, issued a formal directive instructing all banks and brokerage houses maintaining accounts for the funds to immediately stop any debit transactions – including online banking – and suspend all trading activities managed by LR Global.

BGIC stated in its letter, "In order to safeguard the interests of the unitholders, we, as the trustee of DBH First Mutual Fund, Green Delta Mutual Fund, AIBL 1st Islamic Mutual Fund, MBL 1st Mutual Fund, LR Global Bangladesh Mutual Fund One, and NCCBL Mutual Fund-1, have instructed all concerned financial institutions to immediately cease any form of debit or trading activities related to these funds."

The unprecedented move came just days after the BSEC imposed severe penalties on LR Global and several individuals associated with the asset management firm.

On 21 October, the regulator fined the LR Global management and trustee entities a combined amount of around Tk110 crore and banned LR Global's Chief Executive Officer and Chief Investment Officer Reaz Islam for life from participating in the capital market.

The BSEC also permanently banned its former chairman, Professor Shibli Rubayat Ul Islam, after finding evidence of unethical collusion between him and LR Global officials in approving illegal investments from the mutual funds. 

Unauthorised investment

According to the commission's findings, they were involved in the unauthorised investment of Tk23.62 crore from six mutual funds into Padma Printers and Colour Limited – a company that had been delisted from the main board of the stock exchange due to poor performance and lack of business operations.

At the time of investment, Padma Printers had no ongoing business and showed negative financial indicators: a per-share net asset value (NAV) of negative Tk2.74 and retained losses of Tk2.35 crore as of June 2022. Despite this, LR Global invested at an inflated price of Tk289.48 per share – when the same shares were trading at just Tk13.60 on the DSE's over-the-counter platform – using money from six of its managed mutual funds.

Soon after the investment, the company was renamed Quest BDC Limited, and its paid-up capital was raised from Tk1.6 crore to Tk50 crore through private placement. A total of Tk45.02 crore was funnelled into this newly structured entity at a share price of Tk15.88 per share, without offering any allocation to the existing shareholders.

According to the BSEC, these actions breached multiple securities laws and mutual fund regulations. The commission noted that LR Global and its associated directors failed to disclose price-sensitive information, did not hold an extraordinary general meeting (EGM), and ignored the mandatory lock-in period for privately placed shares.

The BSEC report stated that the unethical transactions caused significant harm to unitholders' interests, as Tk68.64 crore of investors' funds were diverted into a loss-making company. It further alleged that LR Global representatives, including fund directors nominated to the Quest BDC board, acted in the firm's own interest rather than for the benefit of investors.

Regulatory measures

The regulator decided to initiate the process of cancelling LR Global's licence as the asset manager for these six funds. Additionally, the trustee BGIC was fined Tk3 crore for its failure to properly monitor the funds and safeguard unitholders' interests.

The BSEC also decided to send the matter to the Financial Reporting Council for further action against the auditor, Shafiq Basak & Co Chartered Accountants, which the regulator said failed to uphold professional standards in auditing Quest BDC's financial statements for the fiscal year ending June 2023.

Moreover, the BSEC referred another part of the case to the Anti-Corruption Commission (ACC) after uncovering what it described as suspicious transactions suggesting potential money laundering. It found that Quest BDC Limited had invested Tk24.95 crore in Thyrocare Bangladesh Limited at a per-share price of Tk52.25 – valued by City Bank Capital Resources – in what investigators believe was a collusive effort between LR Global's Reaz Islam and City Bank Capital's then-managing director Ershad Hossain.

According to data available up to June 2025, the six LR Global-managed funds collectively hold hundreds of crores in assets. Their combined value at cost stands significantly higher than their market value, reflecting weakened investor confidence and declining asset performance following years of controversy and poor management.

For instance, LR Global Bangladesh Mutual Fund One has a cost value of Tk335.95 crore but a market value of only Tk258.19 crore. Similarly, Green Delta Mutual Fund's assets are valued at Tk164.46 crore at cost but just Tk128.39 crore in market terms.

A closer look reveals large disparities between investments in listed and non-listed securities. The six funds collectively have significant exposure to non-listed entities, many of which have failed to deliver returns. For example, the Green Delta Mutual Fund has Tk30.39 crore invested in non-listed securities, now worth just Tk24.38 crore. The NCCBL Mutual Fund One shows a similar trend, with Tk21.39 crore invested in non-listed securities but a market valuation of Tk21.18 crore.

Despite holding sizable cash reserves across bank accounts – such as Tk38.60 crore for LR Global Bangladesh Mutual Fund One and Tk15.23 crore for Green Delta Mutual Fund – none of the six funds have declared dividends since the 2022-23 fiscal year.

A turning point for industry

Market analysts say the freeze on transactions marks a critical turning point in Bangladesh's mutual fund industry.

"This is an extraordinary step, but it reflects the gravity of the misconduct and the regulator's intent to restore investor confidence," said a senior fund manager on condition of anonymity. 

"The suspension will temporarily protect unitholders' money, but it also underscores how deeply governance has broken down within LR Global's operations," he added.