The High Court (HC) has stayed execution of the securities regulator's directive regarding conversion or redemption of the closed-end mutual funds (MFs).
The HC bench, comprising Justice Mirza Hussain Haider and Justice A K M Zahirul Hoque, issued the stay order on September 15, following a writ petition. It was filed by Ali Zaman, a unit holder of MFs, challenging the regulatory directive issued on July 8, based on the decision taken at a meeting on June 29.
Following the decision, Bangladesh Securities and Exchange Commission (BSEC) asked the state-run Investment Corporation of Bangladesh (ICB) and AIMS of Bangladesh to complete redemption or conversion of their ten closed-end MFs into open-end ones.
As per the latest BSEC deadlines, the redemption or conversion of 1st ICB MF was supposed to be completed by December 31, 2015, whereas that of 2nd ICB MF by January 31, 2016, 3rd ICB MF by February 29, 2016, 4th ICB MF by March 31, 2016, 5th ICB MF by April 30, 2016, 6th ICB MF by June 30, 2016, 7th ICB MF by September 30, 2016, and 8th ICB MF by December 31, 2016.
On the other hand, AIMS First Guaranteed Mutual Fund and Grameen Mutual Fund One were supposed to be redeemed or converted by December 31, 2015.
Both ICB and AIMS also announced record dates as part of conversion process of their MFs.
In a directive issued on January 24, 2010, the securities regulator said tenures of the closed-end MFs would not be more than 10 years, and the MFs which had crossed 10 years would have to be redeemed by December 31, 2011.
Later, tenures of the ICB-managed closed-end MFs were extended several times, following plea of the corporation.
HC issued a Rule Nisi upon the respondents as to why the order dated 24.01.2010 fixing the tenure of the closed-end MFs and liquidate the funds in violation of Rule 50 (kha) of the Securities and Exchange Commission (Mutual Fund) Rules, 2001 and the decision of June 29, 2015 will not be declared to have been issued without lawful authority.
The respondents of the writ petition are: Ministry of Finance, the securities regulator and its executive director and chairman, ICB and its managing director, and AIMS of Bangladesh and its managing director.
"The closed-end MFs, managed by ICB and AIMS, have good reputations in the capital market. That's why I think such MFs should be continued without changing their nature, considering the interest of capital market and investors," said Ali Zaman, petitioner of the writ.
He said the closed-end MFs either should be continued without changing nature or redeemed, so that the unit-holders get back their investment as net asset values (NAVs).
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