12 mutual funds under BSEC investigation over alleged irregularities

To conduct the probe, the market regulator has formed six investigative committees tasked with scrutinizing the operations, transactions and governance of the twelve mutual funds , which collectively oversee assets worth around Tk3,500 crore.

The Bangladesh Securities and Exchange Commission (BSEC) has initiated a wide-ranging investigation into mutual funds and special purpose vehicles, citing long-standing allegations of irregularities, weak governance and risks to investors' interests.

To conduct the probe, the market regulator has formed six investigative committees tasked with scrutinizing the operations, transactions and governance of the funds, which collectively oversee assets worth around Tk3,500 crore.

According to BSEC officials, the Market Intelligence and Investigation Division issued a formal order on 27 November, although the committees began their work only last week. The investigation teams have been instructed to complete their inquiries and submit separate reports to the Commission within 60 working days.

BSEC Spokesperson Abul Kalam told TBS that the original three-member committee, formed on 10 November, was dissolved and replaced with six larger committees. These committees will submit their reports to the Commission within 60 days, after which BSEC will take the necessary follow-up actions.

In a letter to the company, the BSEC noted that shareholder-directors, Chowdhury Nafeez Sarafat, is under investigation by the Anti-Corruption Commission (ACC) for alleged corruption, embezzlement, and financial irregularities. Travel bans have also been imposed on them. This situation has raised serious concerns about corporate governance and the safety of the funds under the company's management.

According to the BSEC, under such circumstances, the funds are in a vulnerable and uncertain position. To protect the interests of the capital market, investors, and unit holders, a comprehensive investigation into the company's mutual funds has become necessary.

AKM Mamunur Rashid, executive vice president of the company, told this newspaper, "We are aware of this matter. We are trying to cooperate with the investigation committee. It is to be mentioned that, Dr. Hasan Imam a reputed businessperson victimized by Chowdhury Nafeez Sarafat and his allies during awami league tenure.

As per BSEC's Terms of Reference (ToR), the investigative committees will review all bank accounts – active, dormant, and closed – of the mutual funds to identify any unauthorized or illegal transactions. Additionally, all block market trades executed on the Dhaka and Chittagong stock exchanges from 1 January 2017 to the present will be examined.

The committees will also review all Beneficiary Owners (BO) account transactions and portfolio statements. Investments, excluding Best Holdings Limited, will be checked for compliance with relevant laws and regulations. Corresponding cash flows, income, and current performance of the investments will be verified, and it will be assessed whether the Net Asset Value (NAV) has been overstated due to impaired or non-performing assets.

The investigation will also verify interest and dividend income from investments, dividend distribution to unit holders, and profits from term deposits held with banks and financial institutions. Furthermore, the committees will examine whether the asset manager, trustee, custodian, independent auditor, and other relevant parties have properly discharged their duties.

The six newly formed committees include BSEC officials at the level of additional director, joint director, deputy director, and assistant director. Each committee will separately investigate the various mutual funds. Additional Director Mohammad Rokibur Rahman will coordinate among the committees, while the Market Intelligence and Investigation Division will provide necessary support.

Market observers noted that in the past, despite allegations of irregularities and legal violations against various mutual funds, strict actions were rarely taken. However, following recent political and administrative changes, the Commission is now attempting to restore order in the mutual fund sector. Investors hope that through this investigation, the true extent of alleged irregularities will be revealed and, if wrongdoing is confirmed, legal action will be taken against the responsible parties.