BSEC extends tenure for ten more years

The securities regulator has extended the tenure of the existing closed-end mutual funds (MFs) for another term of ten years.

In this regard, the Bangladesh Securities and Exchange Commission (BSEC) has issued a directive scrapping its previous directive regarding conversion or liquidation of closed-end MFs on completion of tenure of ten years.

According to BSEC directive, total tenure, including another term of ten years, of the existing closed-end MFs will not be more than twenty years.

"The existing closed-end MFs which are unwilling to extend tenure will be allowed to be converted or liquidated as per the rules," the BSEC directive said.

Asked, BSEC Executive Director Mohammad Saifur Rahman said the regulator took the decision following the instruction of the government.

However, the former chairman of the securities regulator Faruq Ahmad Siddiqi has differed with the decision of extending the tenure of closed-end MFs, as the decision is not applicable to the characteristic of such funds.

He said unit-holders could have been benefited if they would get back money as per the NAV (Net Asset Value) following the liquidation of closed-end MFs.

"The decision of extending the tenure of closed-end MFs is not right at all as market prices of most of the mutual funds are now being traded below face value and NAV," Mr. Siddiqi said.

Asked, fund managers refused to make comment on the decision of the securities regulator.

On September 6 last, a high level meeting was held at the ministry of finance (MoF) to settle the tenure of existing closed-end MFs.

Finance Minister AMA Muhith chaired the meeting attended by BSEC chairman and other representatives of other stakeholders including Dhaka Stock Exchange (DSE) and Investment Corporation of Bangladesh (ICB).

The three options which were discussed at that meeting were liquidation of closed-end MFs as per rules, conversion of the funds into open-end ones and extension of tenure once for ten years, according to a meeting participant.

Finally, the securities regulator on Sunday took the decision of extending the tenure of closed-end MFs for another term of ten years.

Asked, DSE managing director K. A. M. Majedur Rahman, said the government took the decision considering different aspects.

Earlier on June 29 in 2015, the securities regulator had set deadlines for conversion or liquidation of the closed-end MFs, which earlier crossed 10 years, managed by the ICB and AIMS of Bangladesh in accordance with a decision taken by three-fourths of the unit-holders.

Later, a writ partition was filed with the High Court (HC) challenging the BSEC's directive.

Finally, the BSEC directive regarding conversion or liquidation of closed-end MFs remained valid as the Appellate Division of the Supreme Court upheld the directive.

Following the verdict of the Appellate Division, two closed-end MFs managed by AIMS of Bangladesh were liquidated, while seven other closed-end MFs, managed by ICB, were converted into open-end ones.

Presently, there are 37 closed-end MFs listed with the country's stock exchanges.

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