Four MFs to follow SEC's new pvt placement rule
Monday, 26 April 2010
Sheikh Shahariar Zaman
Four mutual funds (MFs), which got approval from the market regulator in the last two months to float shares, will have to follow the new SEC guidelines on private placement.
The companies are LR Global, Popular Life First MF, Al Arafah Bank First MF and Green Delta First MF.
The Securities and Exchange Commission (SEC) last week slapped curb on private sale of mutual funds to individuals and companies to boost the small investors' stake.
Under the existing laws, a mutual fund could sell 40 per cent of its stake through private placements.
However, according to the revised placement rules, a listed company would be able to buy units worth Tk 10 million, and a non-listed company Tk five million. Individuals can buy shares up to Tk 1.0 million under private placement.
Earlier, there was no ceiling as to what portion of a mutual fund's private placement an individual or a company could buy.
The regulator has taken the decision to fix the maximum chunk for the listed companies because their gain would eventually benefit the small investors, said a SEC official.
"The curb has been imposed to spread the benefit of private placement among wider number of investors," he said.
Officials said there have been instances like the recent sale of EBL First Mutual Fund and DBH First Mutual Fund, in which only a handful of individuals pocketed "huge windfall gain" once the funds hit the market, trading at around three times prices than their face value.
About 50 MFs are awaiting approval of the regulator.
Four mutual funds (MFs), which got approval from the market regulator in the last two months to float shares, will have to follow the new SEC guidelines on private placement.
The companies are LR Global, Popular Life First MF, Al Arafah Bank First MF and Green Delta First MF.
The Securities and Exchange Commission (SEC) last week slapped curb on private sale of mutual funds to individuals and companies to boost the small investors' stake.
Under the existing laws, a mutual fund could sell 40 per cent of its stake through private placements.
However, according to the revised placement rules, a listed company would be able to buy units worth Tk 10 million, and a non-listed company Tk five million. Individuals can buy shares up to Tk 1.0 million under private placement.
Earlier, there was no ceiling as to what portion of a mutual fund's private placement an individual or a company could buy.
The regulator has taken the decision to fix the maximum chunk for the listed companies because their gain would eventually benefit the small investors, said a SEC official.
"The curb has been imposed to spread the benefit of private placement among wider number of investors," he said.
Officials said there have been instances like the recent sale of EBL First Mutual Fund and DBH First Mutual Fund, in which only a handful of individuals pocketed "huge windfall gain" once the funds hit the market, trading at around three times prices than their face value.
About 50 MFs are awaiting approval of the regulator.