The market regulator has effectively brought local operations of LR Global Bangladesh Asset Management Company to a halt by cancelling its appointment as asset manager of six close-ended mutual funds, citing serious violations of securities laws and failure to protect investors' interests.
The affected funds are DBH First Mutual Fund, Green Delta Mutual Fund, AIBL First Islamic Mutual Fund, LR Global Bangladesh Mutual Fund-1, NCCBL Mutual Fund-1, and MBL First Mutual Fund.
After the regulatory move, LR Global is no longer managing any fund in Bangladesh. The Bangladesh Securities and Exchange Commission (BSEC) has also initiated a process to cancel the company's registration.
The decision was taken at a board meeting of the BSEC earlier this month, according to a stock exchange disclosure.
According to BSEC officials, the decision followed findings of violations of securities laws and Mutual Fund rules, failure to perform fiduciary duties, conflict of interest, and serious harm to unitholders.
A major finding relates to investments made in Quest BDC Limited (formerly Padma Printers & Colors Limited). BSEC's review found that the six funds under LR Global invested around Tk 23.6 crore to acquire a 51 per cent stake in the company. Later, additional share money deposits were converted into ordinary shares.
The regulator said the investment was made without proper financial analysis, violating the Mutual Fund Rules, 2001. That resulted in significant losses to unitholders.
It also noted price discrepancies. While Quest BDC shares were approved at Tk 10.60 each, LR Global purchased the shares at much higher rates - Tk 289.48 - and its sister concern acquired shares at lower prices, creating what the commission described as a clear conflict of interest.
The securities regulator further observed that more than 15 per cent of a single company's paid-up capital had been purchased with money from a single fund, in violation of regulatory limits. The appointment of a director and managing director at Quest BDC without trustee or commission approval was also found to be inconsistent with mutual fund regulations.
The regulator said that investments in Quest BDC have yielded no returns since 2022.
With the shares of the company being traded in the OTC market, disposal opportunities remain limited - exposing the fund investors to further risk.
BSEC spokesperson Md Abul Kalam said the asset manager failed in its duties, engaged in serious regulatory breaches, and acted against the interests of unitholders.
The funds' trustees have been instructed to take necessary legal steps and initiate the process of appointing a new asset manager. However, no replacement has yet been finalised, as the funds are expected to undergo audit before transfer.
Earlier, in October last year, several individuals linked to Quest BDC - including LR Global's chief investment officer - were permanently barred from capital market activities, while financial penalties were imposed, and money laundering allegations were referred to the Anti-Corruption Commission.
Market insiders view the latest move as one of the strongest enforcement actions taken against an asset management company in recent years.
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