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Assets become worthless as regulator freezes Alliance Capital's bank accounts

MOHAMMAD MUFAZZAL | April 17, 2023 00:00:00

Investors have been unable to liquidate their assets managed by Alliance Capital Asset Management for more than four months.

Trading in open-end mutual funds (MF) -- MTB Unit Fund and Alliance Shandhani Life Unit Fund -- has remained suspended after the bank accounts of the asset management company were frozen.

The regulator issued an order in early December 2022 to freeze the accounts in the wake of misappropriation of Tk 450 million from the unit funds.

The Bangladesh Securities and Exchange Commission (BSEC) asked top officials of Alliance Capital not to carry out any transactions of units of the funds.

Then Bangladesh Financial Intelligence Unit (BFIU) froze the bank accounts of Alliance Capital, as recommended by the BSEC.

An asset manager is unable to pay back unit holders if they seek to liquidate their holdings when the company's bank accounts remain frozen.

However, the very advantage of investing in open-end mutual funds is the scope of realising investments and profit by selling units at the net asset value (NAV) whenever investors wish.

A commissioner of the securities regulator, Dr. Mizanur Rahman said redemption of the funds had been suspended considering interest of the unit holders.

"The regulator suspended transactions following initial findings of fund embezzlement. Transactions cannot be allowed until the investigation [by BSEC] is completed."

The financial figures shown by the asset manager was exaggerated, said Mr Rahman, adding that in such a situation unit holders, who would come first to liquidate investments, would be benefitted.

But unit holders who would come later would be losers. They would not get their fair share, which is why the regulator stopped sell-buy of the units of the MFs, said the BSEC commissioner.

Though it was initially found that Alliance Capital Asset Management moved Tk 450 million from the unit funds to its bank accounts, Mr Rahman said the exact amount would be known after the completion of the probe.

Asked about possible remedies for investors, the commissioner said the investigation would be completed within weeks and then the regulator would decide how to protect the interest of unit holders.

Recent data reveals that no trade in the MFs has been executed since early December 2022.

According to IDLC Asset Management, the value of assets managed under the portfolio of MTB Unit Fund was Tk 877 million on December 27 and the amount increased to Tk 902 million by April 11.

Assets under Alliance Shandhani Life Unit Fund were worth Tk 267 million on December 27, which went up to Tk 274 million on April 11.

Meanwhile, Mutual Trust Bank (MTB), sponsor of MTB Unit Fund, demanded that its investment of Tk 200 million be liquidated.

It communicated the matter to the fund's trustee Bangladesh General Insurance Company (BGIC).

MTB says it wants to keep the investment risk-free, and the money, after being withdrawn from the mutual fund, would be injected into the stock market in increasing the bank's market exposure.

BGIC's Managing Director Ahmed Saifuddin Chowdhury said the liquidation of the MTB's investment would take time as transactions of the fund's units remained suspended.

A complete redemption of the fund is must if the sponsor liquidates its whole investment.

MTB's group chief financial officer Mohammad Nazmul Hossain said a negotiation between the lender and the asset manager was on.

"Our bank will keep a portion (about 10 per cent) of its investment in the fund," Mr Hossain added.

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