Regulator to unravel how Nafeez deploys own firm to misuse Padma Bank's fund
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The securities regulator has formed a probe body to investigate alleged financial anomalies in Strategic Equity Management Limited (SEML), owned by Chowdhury Nafeez Sarafat and his family.
Mr Sarafat is a former chairman of Padma Bank and was an influential person in the banking sector and the stock market during the Awami League-led regime.
A BSEC official requesting not to be named said that Mr Sarafat abused power to siphon off more than Tk 2 billion from Padma Bank on the pretext of launching an Alternative Investment Fund in 2015.
The money was then diverted to other companies owned by Mr Sarafat and his family through Strategic Equity Management, an asset management company.
The three-member panel has been asked to look into the use of the Fund by Strategic Equity Management in the name of alternative investments and detect irregularities involved.
The enquiry committee led by Bangladesh Securities and Exchange Commission (BSEC) Additional Director Mohammad Amdadul Hoque was formed on Tuesday. It is in the greater interest of the capital market and general investors, reads an order issued by the BSEC.
On completion of the probe, a report will have to be submitted within the next 60 working days, according to the order issued on Wednesday.
The securities regulator said the panel would examine whether the Alternative Investment Fund of Bangladesh had been used in compliance with BSEC (Alternative Investment) Rules, 2015 and constitutive documents.
Constitutive documents refer to the principal documents and agreements governing the formation of the fund, including the trust deed, placement memorandum, subscription agreement, and investment management agreement.
The probe body will also see through documentary evidence of all investments made out of the Fund and if there were any conflicts of interest.
Investigators will collect bank statements of the Fund and check the balance at the end of the accounting year. It will also scrutinize evidence of interest or profits from term deposits and of dividend and capital gains from investments in listed securities and non-listed securities since the Fund's inception.
Examination of the documents will, as expected, help identify illicit payments out of the bank accounts of the Fund to the benefit of the fund manager and other parties.
The panel will also analyze and report operating expenses of the Fund and the role of the fund manager and the trustee in the governance of the Fund.
Alternative Investment Fund of Bangladesh, first of its kind, was formed with the size of Tk 5 billion, managed by Strategic Equity Management.
Such funds do not fall into conventional investment categories, such as stocks, bonds, and cash.
Alternative investments include private equity or venture capital, hedge funds, managed futures, art and antiques, commodities, and derivatives contracts.
Strategic Equity Management was owned by Anjuman Ara Shahid, wife of Mr Sarafat. The asset management company (AMC) received its license from the BSEC in 2013.
Mr Sarafat was a sponsor shareholder of Padma Bank at the time of its inception in 2013.
In 2015 and 2016, Padma Bank invested Tk 1.45 billion in three newly-formed mutual funds: Tk 1 billion in First Alternative Investment Fund, Tk 250 million in Strategic Equity Management Shariah Fund, and Tk 200 million in Strategic Equity Management Fund.
All these funds are managed by Strategic Equity Management, according to the Registrar of Joint Stock Companies (RJSC).
Mr Sarafat is also the chairman of RACE Management, the country's biggest fund management firm since 2008.
The BSEC official, who spoke with The FE on condition of anonymity, said Mr Sarafat had personally benefited by investing Padma Bank's money in various funds managed by Strategic Equity Management. Since he was an influential person close to the government during the previous Awami League's regime no organisation, including the BSEC, could take action against the financial frauds, he added.
Following the downfall of the Awami League-led government on August 5, many organisations, including the BSEC, launched investigations against Mr Sarafat.
On August 22, the BSEC suspended trades in and transfers of securities in the portfolios of Mr Sarafat.
The Bangladesh Financial Intelligence Unit (BFIU) on August 26 also asked banks to freeze the accounts of Mr Sarafat, his wife Anjuman Ara and son Rahib Safwan Sarafat Chowdhury.
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