SEC urged to relax margin restrictions on Mutual Fund shares
Wednesday, 7 April 2010
FE Report
The Association of Asset Management Companies (AAMC) Tuesday urged the Securities and Exchange Commission (SEC) to relax margin restrictions on buying Mutual Fund shares.
"Though Mutual Funds are designed to protect retail investors from speculative losses, they are now prevented from buying such shares due to the SEC's margin rules which is excessively restrictive and discriminatory," a presentation of AAMC submitted to the SEC chairman Zia-ul Haq Khandaker said.
Present from the AAMC, among others, were Wahiduzzaman Khandaker, CEO of ICB AMCL, Reaz Islam, CEO & MD of LR Global and Hasan Imam, CEO & MD of RACE Asset Management.
Due to such margin restrictions, Mutual Fund shares are now placed in the "Non Tradable" category at most merchant banks, thereby preventing investors from buying Mutual Fund shares.
The AAMC expressed the view that this situation is excessively restrictive and discriminatory toward Mutual Fund shares, especially in light of the fact that such shares are less speculative buys than many marginable shares in other sectors.
Citing examples in international markets, including in neighboring India, the AAMC requested the SEC to ease such restrictions and place Mutual Fund shares on equal footing with other sector shares as far as margin availability is concerned.
Several other topics discussed in the meeting were increasing proposed cap on institutional private placement, allowing AMCs to take part in the book building process and seeking input from AMCs during the rule making process impacting Mutual Funds.
The AAMC members also requested the SEC to reconsider its floating proposal to limit institutional pre-IPO placement for Mutual Fund shares at only Taka 1.0 million per institution.
Given the need for more institutional investments in our capital markets, the AAMC takes the view that Tk. 1.0 million per institution should be increased so that institutional investments into Mutual Fund shares are not discouraged.
The AAMC also made a plea to allow AMCs to participate in the price discovery process during IPOs.
Members of AAMC also urged the SEC to solicit input from AMCs during the formative phase of any new regulations or changes in regulation.
Such constructive dialogue will not only help SEC consider in advance the real world impact of its proposed policies, but also ease the implementation of such policies if there is early "buy in" from industry players.
SEC officials gave assurance that the AAMC's concerns will be given due consideration.
The Association of Asset Management Companies (AAMC) Tuesday urged the Securities and Exchange Commission (SEC) to relax margin restrictions on buying Mutual Fund shares.
"Though Mutual Funds are designed to protect retail investors from speculative losses, they are now prevented from buying such shares due to the SEC's margin rules which is excessively restrictive and discriminatory," a presentation of AAMC submitted to the SEC chairman Zia-ul Haq Khandaker said.
Present from the AAMC, among others, were Wahiduzzaman Khandaker, CEO of ICB AMCL, Reaz Islam, CEO & MD of LR Global and Hasan Imam, CEO & MD of RACE Asset Management.
Due to such margin restrictions, Mutual Fund shares are now placed in the "Non Tradable" category at most merchant banks, thereby preventing investors from buying Mutual Fund shares.
The AAMC expressed the view that this situation is excessively restrictive and discriminatory toward Mutual Fund shares, especially in light of the fact that such shares are less speculative buys than many marginable shares in other sectors.
Citing examples in international markets, including in neighboring India, the AAMC requested the SEC to ease such restrictions and place Mutual Fund shares on equal footing with other sector shares as far as margin availability is concerned.
Several other topics discussed in the meeting were increasing proposed cap on institutional private placement, allowing AMCs to take part in the book building process and seeking input from AMCs during the rule making process impacting Mutual Funds.
The AAMC members also requested the SEC to reconsider its floating proposal to limit institutional pre-IPO placement for Mutual Fund shares at only Taka 1.0 million per institution.
Given the need for more institutional investments in our capital markets, the AAMC takes the view that Tk. 1.0 million per institution should be increased so that institutional investments into Mutual Fund shares are not discouraged.
The AAMC also made a plea to allow AMCs to participate in the price discovery process during IPOs.
Members of AAMC also urged the SEC to solicit input from AMCs during the formative phase of any new regulations or changes in regulation.
Such constructive dialogue will not only help SEC consider in advance the real world impact of its proposed policies, but also ease the implementation of such policies if there is early "buy in" from industry players.
SEC officials gave assurance that the AAMC's concerns will be given due consideration.