ICB Mutual Fund breached rules: SEC
Thursday, 9 August 2007
The Investment Corporation of Bangladesh has breached rules in announcing 50 per cent stock dividend against one of its close-end mutual funds, the 1st ICB Mutual Fund, according to the SEC, reports bdnews24.com.
"There is no scope to increase paid-up capital of a close-end fund. The fund's paid-up capital will exceed the approved limit if it provides stock dividend for its shareholders. I think it's a violation of rules," Faruq Ahmad Siddiqi, chairman of the Securities and Exchange Commission, told bdnews24.com Wednesday.
The SEC has asked the ICB to explain why it had announced stock dividend against the Fund.
The ICB, one of the major institutional investors in Bangladesh, posted 190 per cent cash and 50 per cent stock dividends on July 31 against its 1st Mutual Fund, a close-end fund in nature. The dividends were announced for fiscal 2006-07.
The disclosure also spurred the prices of its shares. The price of the 1st ICB MF, which was Tk 3881.25 prior to the dividend posting, closed at Tk 6288.75 Wednesday.
The 1st ICB MF, listed on the stock exchange in 1980 as a close-end fund, has a paid-up capital of Tk 5.0 million, with book value of each share at Tk 100.
A closed-end fund is a collective investment scheme with a limited number of shares. New shares are rarely issued once the fund is launched.
Shares of such funds are not normally redeemable for cash or securities until the fund liquidates.
"We have already sent our reply. We have issued the stock dividend as per our declaration in the prospectus," a senior ICB official told bdnews24.com on condition of anonymity.
The official, citing the prospectus, said: "Our prospectus says profit can be distributed in cash or in kind."
"There is no scope to increase paid-up capital of a close-end fund. The fund's paid-up capital will exceed the approved limit if it provides stock dividend for its shareholders. I think it's a violation of rules," Faruq Ahmad Siddiqi, chairman of the Securities and Exchange Commission, told bdnews24.com Wednesday.
The SEC has asked the ICB to explain why it had announced stock dividend against the Fund.
The ICB, one of the major institutional investors in Bangladesh, posted 190 per cent cash and 50 per cent stock dividends on July 31 against its 1st Mutual Fund, a close-end fund in nature. The dividends were announced for fiscal 2006-07.
The disclosure also spurred the prices of its shares. The price of the 1st ICB MF, which was Tk 3881.25 prior to the dividend posting, closed at Tk 6288.75 Wednesday.
The 1st ICB MF, listed on the stock exchange in 1980 as a close-end fund, has a paid-up capital of Tk 5.0 million, with book value of each share at Tk 100.
A closed-end fund is a collective investment scheme with a limited number of shares. New shares are rarely issued once the fund is launched.
Shares of such funds are not normally redeemable for cash or securities until the fund liquidates.
"We have already sent our reply. We have issued the stock dividend as per our declaration in the prospectus," a senior ICB official told bdnews24.com on condition of anonymity.
The official, citing the prospectus, said: "Our prospectus says profit can be distributed in cash or in kind."