LR Global Bangladesh Asset Management Company Limited has brought allegations over manipulating the unit price of one of its mutual funds (MF) against some other asset management companies (AMCs) and institutional investors.
In a press release, issued on Wednesday, LR Global said those parties accumulated a substantial number of units of DBH First MF's, managed by LR Global, directly, through block trade or through market intermediaries 'concealing' their identities.
In doing these they had malicious intentions of manipulating its price and damaging the position of LR Global for their personal gains, it claimed.
"Based on a report of the Central Depository Bangladesh Limited (CDBL), LR Global confirmed the suspicious trading activities of DBH First MF by some institutional investors."
The release also said LR Global has informed the Bangladesh Securities and Exchange Commission (BSEC) and the stock exchanges of the allegations brought against other AMCs and institutional investors.
The situation arose, as LR Global, on August 21, extended the tenure of DBH First MF for another term of 10 years, following a directive of the securities regulator issued on September 17, 2018.
Talking to some newsmen, CEO of LR Global Reaz Islam said the top officials of IDLC Investments, VIPB AMC, EDGE AMC and some other institutions were involved in the manipulation.
He also said those persons also conducted activities breaching 'insider' trading rules.
Meanwhile, Bangladesh General Insurance Company Limited (BGIC), the trustee of DBH First MF, sent a letter to the BSEC on Wednesday, seeking its guidance to resolve the issue.
In its letter, BGIC also said the unit-holders, having majority units, urged the trustee to call a meeting with the agenda of converting the MF to an open-end one.
However, top officials of the 'accused' institutions ruled out the allegations regarding price manipulation, saying that the institutional investors having majority stakes in DBH First MF wrote to the trustee for calling a meeting of the unit-holders.
"The letters of the institutional investors, including the sponsor DBH, included the proposal of setting agenda to convert DBH First MF into an open-end one after completion of tenure," said an institutional investor having stake in the fund.
The officials also condemned LR Global's way of raising allegations through public domains such as facebook.
They further said the conflict mainly surfaced after the sudden tenure extension of DBH First MF, where the institutional investors have majority stakes.
According to them, BRAC, BRAC Bank, Delta Life Insurance, United Commercial Bank, Pubali Securities, AT Capital MF, IDLC Portfolio, two MFs of IDLC, four MFs of VIPB AMC, and two MFs of EDGE AMC hold 77.4 per cent units of DBH First MF.
Md. Moniruzzaman, managing director of IDLC Investments, said as per the investment management agreement, an AMC is appointed for managing a MF for a certain period.
"On completion of the tenure, the sponsor of the MF told the trustee that they are unwilling to continue their investment made in the fund."
Mentioning Section 2 of the Securities and Exchange Commission (Merchant Banker and Portfolio Manager) Rules 1996, he also said an AMC cannot be involved in a competition or deliver any speech that can hamper the prestige and interest of a portfolio manager.
"The press release of LR Global AMC, delivered through public domains, is not supported by the existing rules," he added.
Shahidul Islam, CEO of VIPB AMC, said as per the existing rules three-fourth unit-holders of a MF can sit together through the trustee's initiative to discuss issues related to the fund.
"Whatever we have done is permitted by the rules."
He said before completion of the tenure of DBH First MF, LR Global assured the institutional investors of returning their investments in the fund as per the rules.
"We were in a fix following the MF's sudden tenure extension. Then we communicated with other institutional investors, considering interest of the unit-holders of our MFs," he noted.
Asked about any nexus, Ali Imam, CEO of EDGE AMC, said the institutional investors took position in DBH First MF different times according to their own investment assessments and decisions.
"So, there is nothing regarding the so-called nexus for manipulating the prices of DBH First MF units."
He also said insider trading is related to the persons, who take major decisions of a company.
"We are not the persons of the company that manages the MF. So, the allegation of insider trading, brought against us, is not relevant and true," he opined.
Professor Helal Uddin Nizami, a commissioner of the BSEC, said the regulator will definitely scrutinise any allegation of price manipulation (as claimed by LR Global).
However, the majority unit-holders of an MF can take decision regarding the fund within the purview, stipulated by the laws or regulations concerned.
Mohammad Saifur Rahman, an executive director and spokesperson of the BSEC, refused to make any immediate comment over the allegations brought by LR Global.
"The BSEC will take decision after analysing the total situation," Rahman said.
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