The stock market regulator has ordered Vanguard Asset Management to refund investments it made in purchasing shares of two non-listed companies-Bengal Poly & Paper Sack and AFC Health-in violation of securities rules.
The Bangladesh Securities and Exchange Commission (BSEC) has also decided to impose a fine of Tk 227.5 million on the asset manager if the refund is not made within 30 days of the order issued on Tuesday (May 5).
The decision was taken at a meeting held at the BSEC office and presided over by its chairman, Khondoker Rashed Maqsood, according to a statement issued on Wednesday.
In 2013, the asset manager invested Tk 15 million in Bengal Poly & Paper Sack by purchasing 0.6 million shares at Tk 25 each, including a premium of Tk 15, the statement said.
The investment was made using funds from a mutual fund-Vanguard AML Rupali Bank Balanced Fund-managed by the company, in violation of securities rules.
In 2017, Vanguard Asset Management made another investment of Tk 60 million in AFC Health, acquiring 4.8 million shares at Tk 12.50 each, including a Tk 2.50 premium.
The market watchdog issued the order after completing all procedures, including a hearing based on findings from a recent investigation and recommendations from the enforcement department, BSEC spokesperson Abul Kalam told The FE over the phone.
He said the asset manager failed to follow investment guidelines relating to non-listed securities. Mutual funds are not allowed to invest in non-listed companies, although they may invest in firms prior to their initial public offerings (IPOs).
In this case, none of the companies in which Vanguard Asset Management invested entered the secondary market.
Following the investigation, the regulator instructed the company to return a total of Tk 205.9 million to the pooled fund or face penalties.
"The commission directed Vanguard Asset Management to deposit or refund the amount with a 7 to 10 years' investment return," the BSEC spokesperson said.
The regulator also stated that if the payment is not made within seven days after the 30-day deadline, the asset manager must settle the amount from its own accounts.
Continued failure to comply will result in an additional fine of Tk 10,000 per day.
The BSEC has also fined the Investment Corporation of Bangladesh (ICB) Tk 1.5 million for failing to safeguard the interests of unitholders of the Vanguard AML Rupali Bank Balanced Fund, for which it acted as trustee.
According to the BSEC, the ICB failed to exercise proper oversight and due diligence in its role as trustee.
The commission further noted that although the fund manager had maintained a 99 per cent provision against the investments, this was not clearly disclosed in the audit report.
As a result, the audit firm, Malek Siddiqui Wali & Co., has been referred to the Financial Reporting Council (FRC) for further action.
Market analysts say the move signals a tougher regulatory stance, with the BSEC extending accountability beyond asset managers to trustees and auditors in an effort to enforce compliance and restore investor confidence in the mutual fund sector.
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