HC stays amendments to mutual fund rules

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The High Court (HC) Monday stayed for a period of three months the changes made by the capital market regulator in the rules for the close-end mutual funds, restricting the funds from issuing preemptive rights or bonus shares.

A HC division bench comprising justice Khademul Islam Chowdhury and Mashuq Hossain Chowdhury issued the order following a writ petition filed by the three individual investors-Ibrahim Akhand, Delwar Hossain and Raihana Haque-- challenging the amendments to the mutual fund rules. The Securities and Exchange Commission approved the amendments on June 22 last.

The court also issued a show cause notice on the securities regulator to reply within two weeks as to why its approval of the amendment of the close-end mutual fund rules would not be declared illegal.

The eminent lawyer Dr M Jahir and Barrister Shafiqur Rahman moved for the petitioners.

The court also directed all the listed 14 mutual funds, having a total paid up capital of Tk 865.50 million, not to declare any dividend during the three-month stay order.

It has also asked the state-owned Investment Corporation of Bangladesh (ICB) not to distribute any dividend declared by it to the unit holders of its 11 mutual funds.

In his reaction of the HC order, SEC Chairman Faruq Ahmad Siddiqi told the FE, "I have come to know about the court order. But I do not want to comment on it as the commission is yet to receive the HC notice."

On June 26 last, the securities regulator decided in principle to review the close-end mutual fund rules and, to give the same a final shape, it sought opinions and recommendations from the members of the public.

During the period from June 26 and July 31, the market capitalisaon of all the mutual funds came down to around Tk 6.0 billion from about Tk 12 billion.