BSEC suspends trades by another RACE-managed fund
FE REPORT | Friday, 5 July 2024
The securities regulator has 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 a regulatory order issued on Thursday, the Bangladesh Securities and Exchange Commission (BSEC) said it had detected a huge number of block transactions between and among the funds under RACE Asset Management.
BSEC surveillance software found that Race not only executed trades among its managed funds but also traded with other alternative funds and mutual funds, violating Mutual Fund Rules 2001.
The suspension order came nearly two weeks after the regulator imposed a moratorium on transactions of assets in the portfolios of the pooled funds under the management of RACE.
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 suspended any type of transactions, including block market transactions by the above-mentioned fund through Multi Securities and Service or any other brokerage house.
The BSEC took further measures to protect the unitholders of RACE-managed funds.
It forbade Multi Securities & Services, the stock broker that had facilitated unlawful transactions by RACE, to carry out any block transactions until an order is issued removing the bar.
The regulator said every relevant party of the mutual funds under RACE Asset Management shall report to the Commission about their steps and compliance status within three working days.
On June 24, the BSEC suspended all beneficiary owner's (BO) accounts opened in the name of mutual funds managed by RACE Asset Management.
RACE manages 10 close-ended MFs and two open-ended MFs, with assets worth over Tk 30 billion.