The securities regulator has begun an investigation into Popular Life Insurance to find out if it is responsible for any fund misuse and to trace its assets and investments, provoked by auditor's financial review.
Examining the company's audited financial statements, Mohammad Rezaul Karim, executive director and spokesperson of the securities commission, said, it had decided to conduct the probe as it had identified some financial anomalies too.
The auditor in its qualified opinion specifically drew attention to Popular Life's investments in six non-listed companies, made in private placements.
In the qualified opinion posted on the Dhaka bourse's website in August last year, it said the non-listed companies had not floated an IPO until the audit was done.
The auditor could not determine "the chance of recovery, potential gains, or the overall financial stability," of the companies for a lack of supporting documents.
The Bangladesh Securities and Exchange Commission (BSEC) issued the inquiry order on January 9 and asked a three-member probe body to submit a report within 60 days from the date of issuance of the order.
Popular Life injected as much as Tk 147.51 million in the non-listed companies.
"We were unable to determine whether any adjustments to these amounts were necessary," said the auditor in its opinion on the insurance company's financial statement for 2022.
During the audit, the auditor observed that a significant portion of the company's payments to its agents had been made in cash, breaching the Insurance act 2010.
The BSEC investigation team will dig up incidents of non-compliance of the same nature, if there were more, by looking into transactions with other related parties.
Identifying the company's sponsors, promoters, directors, and top management executives, including the chief executive officer, chief financial officer, and company secretary, the inquiry committee will make a full disclosure of related party transactions.
In its opinion, the auditor also expressed dissatisfaction over the premium collection. It spotted premiums included in the 2022 statement, but the money was actually collected the following year.
Moreover, the company had not set aside part of the annual profit as needed under the obligation of profit sharing with workers and for welfare fund as required by the Bangladesh Labour Act 2006.
According to the financial statement for the calendar year 2022, the company had a statutory deposit of Tk 15 million with the central bank and the Jamuna Bank.
The purpose of such deposits is to help ensure that insurance companies have adequate liquidity to honor all legitimate claims of their policyholders.
As of the end of 2022, Popular Life Insurance made investments worth Tk 3.81 billion in Treasury bonds, 4.06 billion in shares and debentures, and Tk 96.75 million in marketable securities.
The BSEC will verify the existence of such investments and their returns.
The probe committee has been asked to examine the existence of and return from all cash and cash equivalent assets over the last five years.
Investigators will also determine the status of funds in immovable properties, fixed assets and with TREC (trading right entitlement certificate) holders.
The role of board directors, audit committee and the top management officials, including managing director, CEO, and chief financial officer, will come under the regulatory scanner as well.
Sponsor-directors of Popular Life Insurance jointly had a 23.70 per cent stake in the firm until the end of November last year, but the securities laws provide for a minimum 30 per cent combined share of them in the organisation.
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