SEC turns down ICB request to extend life of its mutual funds
Thursday, 6 May 2010
FE Report
The securities regulator has turned down a proposal of the Investment Corporation of Bangladesh (ICB) for allowing its eight close-ended mutual funds to trade in the stock market until 2017.
Back in December 2009, the Securities and Exchange Commission (SEC) had set the two-year time frame for redemption of the non-tenured mutual funds that have already crossed 10 years as listed securities.
"The previous order of the commission cannot be changed," said Yasin Ali, a member of the SEC. "There is a scope of being overvalued when it comes to small cap securities, and ICB mutual funds have already become overpriced," he said.
The SEC Tuesday evening rejected the proposal for time extension, prompting the ICB to get ready for wrapping up its eight close-ended mutual funds-- 1st ICB, 2nd ICB, 3rd ICB, 4th ICB, 5th ICB, 6th ICB, 7th ICB and 8th ICB.
The ICB disputed the timeframe and insisted that the 10-year period should be counted from 2007, when the rules were introduced.
Close-ended mutual funds had no specific tenure or maturity period when they were introduced in 1980 under the Controller of Capital Issues and eight funds managed by ICB Asset Management Company Ltd. were floated between 1980 and 1996.
The SEC in 2007 introduced the mutual fund rules, which says the close-ended mutual funds must have a maturity date. The ICB, however, got a waiver in the interest of its investors at that time.
Now, ICB has no other options than paying back the investment along with the benefits of the mutual funds to the all unit holders on pro-rata basis under the timeframe set by the commission.
On Wednesday, share prices of 1st ICB rose 4.31 per cent, 2nd ICB 1.60 per cent, 3rd ICB 0.52 per cent, 4th ICB 4.34 per cent, 6th ICB 1.09 per cent, 7th ICB 2.46 per cent and 8th ICB 1.57 per cent.
Sources said the holders of ICB mutual fund shares would get substantial return following the liquidation of the funds. The market value of most shares held by the mutual funds is quite high at the moment and their disposal, on the one hand, would help beef up the supply of quality shares in the market and, on the other, help the investors get attractive returns on their investment.
A holder of ICB unit certificates has alleged that ICB, for reasons best known to it, has been hiding the actual net worth of its unit and fixing the buying and selling prices of the same well below their actual. A state owned entity should not resort to this kind of unethical practices, he said.
The securities regulator has turned down a proposal of the Investment Corporation of Bangladesh (ICB) for allowing its eight close-ended mutual funds to trade in the stock market until 2017.
Back in December 2009, the Securities and Exchange Commission (SEC) had set the two-year time frame for redemption of the non-tenured mutual funds that have already crossed 10 years as listed securities.
"The previous order of the commission cannot be changed," said Yasin Ali, a member of the SEC. "There is a scope of being overvalued when it comes to small cap securities, and ICB mutual funds have already become overpriced," he said.
The SEC Tuesday evening rejected the proposal for time extension, prompting the ICB to get ready for wrapping up its eight close-ended mutual funds-- 1st ICB, 2nd ICB, 3rd ICB, 4th ICB, 5th ICB, 6th ICB, 7th ICB and 8th ICB.
The ICB disputed the timeframe and insisted that the 10-year period should be counted from 2007, when the rules were introduced.
Close-ended mutual funds had no specific tenure or maturity period when they were introduced in 1980 under the Controller of Capital Issues and eight funds managed by ICB Asset Management Company Ltd. were floated between 1980 and 1996.
The SEC in 2007 introduced the mutual fund rules, which says the close-ended mutual funds must have a maturity date. The ICB, however, got a waiver in the interest of its investors at that time.
Now, ICB has no other options than paying back the investment along with the benefits of the mutual funds to the all unit holders on pro-rata basis under the timeframe set by the commission.
On Wednesday, share prices of 1st ICB rose 4.31 per cent, 2nd ICB 1.60 per cent, 3rd ICB 0.52 per cent, 4th ICB 4.34 per cent, 6th ICB 1.09 per cent, 7th ICB 2.46 per cent and 8th ICB 1.57 per cent.
Sources said the holders of ICB mutual fund shares would get substantial return following the liquidation of the funds. The market value of most shares held by the mutual funds is quite high at the moment and their disposal, on the one hand, would help beef up the supply of quality shares in the market and, on the other, help the investors get attractive returns on their investment.
A holder of ICB unit certificates has alleged that ICB, for reasons best known to it, has been hiding the actual net worth of its unit and fixing the buying and selling prices of the same well below their actual. A state owned entity should not resort to this kind of unethical practices, he said.