The securities regulator is yet to finalise the proposed amendment to rules for mutual funds (MFs), despite the regulator took decision in principle regarding new provisions for the amendment brought eight months back.
On December 7 last, the Bangladesh Securities and Exchange Commission (BSEC) approved some new provisions to be incorporated into the amendment to the Bangladesh Securities and Exchange Commission (Mutual Fund) Rules, 2001 for bringing disciplines in mutual fund sectors.
Normally, the securities regulator takes public opinion before giving final approval to any amendment in the rules.
But no move was observed for taking public opinion for the amendment in rules for MFs.
After some recommendations of re-investment unit (RIU) as dividend of MFs in last year, the securities regulator included the provision of taking regulatory consent for recommending RIU.
As the amendment has not yet come into effect, the AMCs have no legal bar in recommending RIU and two AMCs have recommended RIU for eleven MFs closed-end MFs as dividend amid flat movement of the capital market for the year ended on June 30, 2016.
Professor Helal Uddin Nizami, a BSEC commissioner, said the regulator would decide which amendment will get priority.
"The commission was busy in completing other jobs. That's why the amendment to rules of MFs is yet to be completed. We hope the proposed amendment will be completed in next two months," Nizami said.
Some BSEC officials, however, acknowledged that the market prices of the MFs, which recommended RIU, are in a downtrend compared to the MFs which recommended cash dividends.
Shahidul Islam, managing director of VIPB Asset Management Company, said the unit holders are not benefitted through the RIU unless the secondary market becomes vibrant.
"The unit holders could be benefitted through cash dividends as the market prices of many MFs are below their net asset value (NAV)," Islam said.
The management fees of an AMC can increase if the size of the MF is expanded through the RIU.
Asked, a top official of the Bangladesh General Insurance Company (BGIC), the trustee of some MFs which recommended RIU, said their AMC recommended RIU considering unit holders' interest for the long run.
As per the proposed provision, the fees of the AMCs and Trustees will be restructured.
The BSEC said the provision for cutting the management fees would be included if the AMCs fail to give dividends.
At the same time, the AMCs will be eligible for performance bonus if they are able to give cash dividends above stipulated rates.
The chief executive officer (CEO) of an AMC is also supposed to be appointed with prior consent of the BSEC.
As per the proposed provision, the securities regulator fixed 10 years as tenure of the MFs.
The regulator has also incorporated a mandatory provision of publishing complete information about the fund for the greater interest of the investors.
"Net Asset Value (NAV) of the MFs will have to be calculated daily instead of weekly basis," the draft said.
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