Regulator suspends block trades in assets of RACE-managed pooled funds

Block trades in assets in the portfolios of all mutual funds (MFs) managed by the country's largest private asset management company RACE will remain suspended until the regulatory body issues an order upon completing an investigation.
The suspension order was issued so that the market watchdog can carry out a probe into alleged fund anomalies, said a senior official of the securities regulator.
"[block] Trades have been suspended so that no assets can be sold at lower prices affecting the general investors," the BSEC official said, wishing not to be named.
Meanwhile, the bank accounts of RACE Asset Management and 12 mutual funds that it operates were frozen on Sunday for 15 days, according to several officials of the Bangladesh Securities and Exchange Commission (BSEC).
The stock exchanges and the central depository authority have been asked to submit in three working days information about the funds' BO (beneficiary owner's) accounts, debit and credit balances, and transactions made by RACE, said sources in the Dhaka and Chittagong bourses.
The probe committee formed by the BSEC has been given 60 days from Thursday to finish the task and submit a report.
Managing Director of RACE Hasan Imam could not be reached by phone for comments.
RACE manages 10 close-ended MFs and two open-ended MFs.
Total assets under management (AUM) of RACE were equivalent to Tk 28.70 billion as of February this year, according to IDLC Asset Management.
While block trades will not be executed, there is no bar on trades in the assets of the mutual funds on the main board of the stock exchanges.
Trades on the main board are executed at market prices, but block trades are negotiated deals. There is an apprehension that the asset management company may offload shares on the block board at lower than market prices to its own benefit.
Block market transactions occur at prices within a range of 10 per cent plus or minus the market price. The minimum transaction value is Tk 0.5 million.
The BSEC official said the regulator had been working for a long time to find evidence of alleged anomalies. He, however, refused to elaborate on that for the sake of investigation.
Preferring anonymity, a senior official of a leading asset management company said the suspension of block trades in assets of all MFs managed by a single company is a big incident.
"Definitely, there are major reasons behind the regulatory action," he said.
Asset management companies (AMCs) have been criticised time and again for their role in eroding the confidence of the unit holders.
An AMC namely Universal Financial Solutions embezzled Tk 2.35 billion last year from funds that it managed.
As per the securities rules, the equity funds are required to invest at least 60 per cent in the capital market, with maximum 20 per cent in listed debt securities, and the remaining 40 per cent in the money market.
On the other hand, the debt funds are allowed to invest above 80 per cent in the fixed income securities.
The BSEC had reportedly found mismatches between the investment figures mentioned in the funds' portfolio statements and the financial statements.
The regulator had sought information from RACE regarding fund management but received non-cooperation, BSEC sources told the FE.
Some firms, including RACE and LR Global Bangladesh, had come under regulatory scrutiny several times.

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