Stock market operators oppose SEC proposal on restricting rights or bonus shares by mutual funds
FE Report | Sunday, 29 June 2008
The stock market operators have opposed the Securities and Exchange Commission's (SEC) proposal on restricting the issuances of rights or bonus shares by mutual funds.
"We oppose the SEC proposal as it will affect the growth of mutual funds and thereby cast a negative impact on the overall market," a retail investor told the FE Saturday.
Mutual funds are regarded as one of the risk-free tools in the stock trading and the present stock market growth has been largely supplemented by the rally of mutual funds.
He said the mutual funds, which are in the pipeline will also face uncertainty in floating the securities.
He said a group of investors held a meeting in a city hotel Saturday and decided to send a memorandum to the SEC to withdraw the decision.
The SEC at a meeting Thursday decided in principle to amend its mutual fund rules to bar closed-end mutual fund in increasing their fund size through issuing rights or bonus shares.
The stock market regulatory body decided in principle that no mutual fund will be allowed to give any pre-emptive rights for shares to unit-holders of any existing mutual fund.
The SEC will publish the draft amendments on the newspapers for inviting public suggestions ahead of finalising the amendments to the rules.
'There remains scope of ambiguity in the existing rules over the issue of increasing size of closed-end mutual funds,' said the SEC official adding that the amendments would make the issue comprehensible.
The market operators, however said that SEC took the decision to halt the abnormal rally of mutual funds in the stock market.
During the recent past, prices of all mutual funds have increased 3 to 4 times on an average.
The market operators also said the SEC decision, if implemented, will be a blow to the new opportunities created under the very recent approval of an amendment of 'mutual fund rules' to allow the investment of sizeable pension and gratuity funds in the form of mutual funds in the country's stock market.
Currently, the market has a total of 14 mutual funds worth Tk 866 million only, but the size of the funds will increase manifold within the next few months with the trading of 'ICB NRB second mutual fund' and Grameen One: Scheme Two.
The subscription of 'ICB NRB second mutual fund' worth Tk 1.0 billion has been completed and another one-- Grameen One: Scheme Two--worth Tk 1.25 billion is scheduled to begin tomorrow (June 30).
Investment in mutual funds is considered a safe investment all over the world because of its unique character.
The mutual funds derive revenues from its investment in various securities in the form of cash dividend, stock dividend and interest income.
"We oppose the SEC proposal as it will affect the growth of mutual funds and thereby cast a negative impact on the overall market," a retail investor told the FE Saturday.
Mutual funds are regarded as one of the risk-free tools in the stock trading and the present stock market growth has been largely supplemented by the rally of mutual funds.
He said the mutual funds, which are in the pipeline will also face uncertainty in floating the securities.
He said a group of investors held a meeting in a city hotel Saturday and decided to send a memorandum to the SEC to withdraw the decision.
The SEC at a meeting Thursday decided in principle to amend its mutual fund rules to bar closed-end mutual fund in increasing their fund size through issuing rights or bonus shares.
The stock market regulatory body decided in principle that no mutual fund will be allowed to give any pre-emptive rights for shares to unit-holders of any existing mutual fund.
The SEC will publish the draft amendments on the newspapers for inviting public suggestions ahead of finalising the amendments to the rules.
'There remains scope of ambiguity in the existing rules over the issue of increasing size of closed-end mutual funds,' said the SEC official adding that the amendments would make the issue comprehensible.
The market operators, however said that SEC took the decision to halt the abnormal rally of mutual funds in the stock market.
During the recent past, prices of all mutual funds have increased 3 to 4 times on an average.
The market operators also said the SEC decision, if implemented, will be a blow to the new opportunities created under the very recent approval of an amendment of 'mutual fund rules' to allow the investment of sizeable pension and gratuity funds in the form of mutual funds in the country's stock market.
Currently, the market has a total of 14 mutual funds worth Tk 866 million only, but the size of the funds will increase manifold within the next few months with the trading of 'ICB NRB second mutual fund' and Grameen One: Scheme Two.
The subscription of 'ICB NRB second mutual fund' worth Tk 1.0 billion has been completed and another one-- Grameen One: Scheme Two--worth Tk 1.25 billion is scheduled to begin tomorrow (June 30).
Investment in mutual funds is considered a safe investment all over the world because of its unique character.
The mutual funds derive revenues from its investment in various securities in the form of cash dividend, stock dividend and interest income.