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RACE Asset Management has regained its control over fund management after the withdrawal of two orders issued by the securities regulator eight months back.
Also, the authorized and unauthorized beneficiary owners' (BO) accounts opened by RACE, which had been suspended by the previous commission over alleged fund mismanagement, are to become operational after the latest regulatory directive disclosed on Sunday.
RACE had opened BO accounts with Multi Securities and Services, The Smart Trades, Trust Bank Securities and many other brokers in breach of the mutual fund rules 2001 that obliges asset management companies (AMCs) to keep assets of mutual funds under the supervision of custodians approved by the regulator.
Asked if the un-authorised accounts would be functional again following the latest directive, spokesperson of the securities regulator Mohammad Rezaul Karim said, "whatever was mentioned in the earlier directives would be null and void".
RACE, the country's largest private-sector mutual fund manager, had come under scrutiny over allegations of breach of securities rules and mismanagement of assets.
A regulatory inspection in 2023 identified discrepancies in cash and shares in the portfolios of the fund manager.
Mr Karim, also executive director of the Bangladesh Securities and Exchange Commission (BSEC), said RACE Asset Management, founded by banker turned businessman Chowdhury Nafeez Sarafat and investment professional Hasan Taher Imam, had received a High Court (HC) stay order on the regulatory investigation aimed at digging up further details of the alleged fund mismanagement.
A few other writ petitions filed by RACE are awaiting court orders.
"That's why the commission has withdrawn its orders for the sake of unitholders after analyzing the legal issues," said Mr. Karim, adding that the next course of action would be decided upon receiving orders from the court.
He could not say if the stay order was still effective or had received a time extension.
Mr. Karim also did not say how interest of the unitholders would be secured following the withdrawal of the previous regulatory orders.
On June 24 last year, the previous commission suspended all beneficiary owners' (BO) accounts opened in the name of mutual funds managed by RACE Asset Management.
The risk with unauthorised accounts is that even if the asset manager mishandles the portfolios using them, it will not be reflected in the reported status.
Following the lifting of the suspension order, RACE regained control of those unauthorised accounts too.
RACE manages 10 close-ended mutual funds and holds the highest market share of 47.5 per cent with assets worth Tk 23 billion as of Sunday.
The securities regulator had suspended any type of transactions by an alternative fund run by RACE Asset Management after it found evidence of share trading between mutual funds and the alternative fund in violation of law.
In its July 2024 order, the BSEC unveiled an alternative fund -- Bangladesh Fixed Income Investment Special Purpose Vehicle (BFISPV) or Bangladesh Fixed Income Special Purpose Vehicle or Project BFISPV - under the management of RACE and said transactions of assets belonging to the fund "shall remain suspended from any stock broker until further instruction of the Commission."
A special purpose vehicle is a subsidiary created by a parent company to isolate financial risk. It is also called a special purpose entity (SPE). Its legal status as a separate entity ensures its security even when the parent company goes bankrupt.
The BSEC in July last year also suspended any type of transactions, including block market transactions, by the above-mentioned special purpose fund through Multi Securities and Service or any other brokerage house.
Mamunur Rashid, chief compliance officer of RACE, on Sunday said the HC last week extended its stay order for another six months.
"Our company has been out of operations for around one year and we have been urging the regulator to restore operations."
RACE resumed operations of its MFs on Sunday.