The country's largest asset manager, RACE Management, has been found to have reported a fictitious tax charge of Tk 96.8 million in the FY24 financial statements of six funds under its management.
Following the discovery, the Bangladesh Securities and Exchange Commission (BSEC) referred the matter to the Anti-Corruption Commission (ACC) for necessary action.
Earlier this month, the regulator wrote to the ACC requesting it to step in. The FE correspondent has seen a copy of the letter.
In the letter, the market regulator shared audit observations on the FY24 financial statements, noting inconsistencies relating to tax on the funds' income.
The BSEC quoted the funds' auditor as stating in a qualified audit report that income generated by the funds during FY24 was exempt from income tax. Despite the exemption, the asset manager showed advance income tax payments amounting to approximately Tk 96.8 million.
As the reported tax payment did not align with tax regulations, the securities regulator asked the fund manager to submit evidence of the tax payment. However, the company failed to provide any solid evidence in support of its claim.
Referring to an order issued by the revenue authority in 2011, the BSEC further noted that source tax at a rate of 0.05 per cent is applicable in certain cases. Banks reportedly deducted tax at source (TDS) amounting to approximately Tk 28.18 lakh and deposited it into the government exchequer, which was subsequently adjusted as advance income tax in the funds' accounts.
The BSEC stated in the letter that if the funds' income was indeed tax-free, the payment and adjustment of AIT and TDS would be inconsistent with prevailing tax regulations.
The securities regulator requested the ACC to investigate the matter thoroughly and take necessary legal steps to protect investors' interests in the mutual funds.
The development adds to regulatory scrutiny surrounding mutual fund operations and tax compliance in the capital market.
Earlier, the securities regulator launched a fresh investigation into 12 mutual funds managed by RACE Management over alleged irregularities by the fund manager.
On November 27 last year, the BSEC issued an order forming six separate inquiry committees to conduct a comprehensive investigation into the operations of the mutual funds managed by RACE Management.
RACE accounts for around 44 per cent of assets under management. Its total assets under management (AUM) stood at Tk 19.6 billion as of December last year.
The committees were asked to complete the investigation and submit detailed reports to the Commission within 60 working days.
Chowdhury Nafeez Sarafat is chairman of RACE Management, and Dr Hasan Taher Imam is the managing director. RACE, founded by banker-turned-businessman Mr Sarafat and investment professional Mr Imam, obtained an asset management licence from the BSEC in September 2008.
They are currently under investigation. The ACC has imposed travel bans on them while probes into alleged misappropriation, financial irregularities and related offences are underway.
Previously, a regulatory inspection in 2023 detected severe irregularities, including discrepancies in cash and shares in managed portfolios. The BSEC, however, took no action at the time despite the inspection committee's recommendation for further inquiry.
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