RACE under fresh probes ahead of possible regulatory action

The securities regulator has launched fresh probes into the management of 12 mutual funds operated by Bangladesh RACE Management to dig deeper into allegations of irregularities against the fund manager.
The Bangladesh Securities and Exchange Commission (BSEC) formed six separate inquiry committees on November 27 by issuing an order and asked them to submit detailed reports within 60 working days to the commission, according to the order seen by The Financial Express.
Chowdhury Nafeez Sarafat is the chairman of RACE Management, and Dr Hasan Taher Imam is the managing director. RACE, founded by banker-turned-businessman Sarafat and investment professional Imam, obtained an asset management licence in 2008 from the BSEC.
Both are being investigated by the Anti-Corruption Commission (ACC) for alleged misappropriation, financial irregularities and related offences, according to BSEC documents. Travel bans have also been imposed on them.
The securities commission said in its order that matters related to the governance of the funds had been questioned, exposing risks faced by the company and the pooled funds.
On earlier probes, BSEC spokesperson Md Abul Kalam said the three-member committee formed during the previous commission had not completed its investigations.
"That's why the new commission decided to conduct a comprehensive investigation to safeguard the interests of the capital market as well as unitholders."
The commission will take action as per the probe findings, Mr Kalam added.
The largest private asset manager, RACE accounts for around 44 per cent of assets under management in close-ended funds. The assets managed by RACE in 10 fund portfolios amounted to Tk 19.6 billion as of December 14 this year.
According to the BSEC, RACE Management also handles portfolios of two open-end mutual funds.
As per the terms of reference (ToR), the enquiry committees will collect and review all bank accounts and statements (active, dormant and closed) of the mutual funds and determine whether any unauthorised or unlawful payments were made.
Investigators will examine all block market trades executed by the fund manager under the fund portfolios from January 2017 to date.
The committees will also assess whether investments made by the mutual funds, excluding investments in Best Holdings, complied with the relevant rules. They will verify the authenticity of investment records.
Corresponding cash outflows, returns earned (including interest and dividends), as well as the current status and performance of the investments will be scrutinised. The investigators will also report on whether the net asset value (NAV) has been overstated due to non-performing or impaired assets.
The committees will collect all minutes of board meetings and annual general meetings (AGMs) of RACE Management since its inception and examine whether key managerial personnel (including the managing director, CEO and compliance officer) were appointed in compliance with the relevant rules and regulations.
They will also review and report on whether the asset manager, trustee, custodian, independent auditor and other relevant parties discharged their duties in accordance with applicable laws, regulations and the trust deeds of the funds so as to safeguard the interests of unitholders.
Earlier regulatory inspections detected severe irregularities, including discrepancies in cash and share volumes in 2023. However, the then commission took no action and ignored recommendations for further inquiry.
The new commission, appointed after the political changeover in August last year, has been investigating past irregularities and corruption in the capital market. It has already imposed heavy fines on several wrongdoers and issuers based on probe findings.

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