Ailing MF sector needs reform, BSEC reluctant
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The Bangladesh Securities and Exchange Commission is reluctant to reform the mutual fund sector despite criticisms for its lack of efforts in the area from different capital market stakeholders.
The stock market regulator has taken a number of reform measures in recent days to patch up loopholes in the country’s capital market, but the mutual fund sector, which acts as the market maker in a sluggish period, remained untouched.
The government and the BSEC in recent months brought in changes to a number of rules to reform the capital market after a spate of criticisms about widespread manipulation, irregularities and fraudulent activities in the market.
The commission took steps to block directors’ secret share sales, resolved rampant placement share issuance and tightened initial public offering approval process.
Market experts said the current commission failed to revive the ailing MF sector. The asset management companies, which manage mutual funds, are bound to invest at least 50 per cent of their funds in the capital market.
Market experts said investors expected that the AMCs would play a key role in reviving the market during the recent downward trend, but they failed to play the role.
On top of that, the asset management companies of the mutual funds could not provide well-deserved dividends to the unit holders.
In 2018, the AMCs gave just Tk 163.37 crore in cash dividends to the unit holders, a 28.3-per cent less than what was given in 2017. Most of the AMCs provided re-investment units to the unit holders.
It was observed in the last six years that only 5-7 MFs provided double-digit dividend while the savings certificates and most of the commercial banks provided around 9 per cent interest for deposits that turned the investors away from the MF sector, market experts said.
Out of 37 MFs listed with the stock exchanges, 33 issues were being traded far below their issue prices and the rest were being traded just over their issue prices, Dhaka Stock Exchange data showed. Market operators said that the AMCs were deceiving the investors.
The BSEC approved some draft rules for amending MF rules at a meeting held on December 7, 2015 and decided to publish the draft rules in the national dailies seeking public opinions, but the commission is yet to publish the rules.
The BSEC in an amendment to the mutual fund rules in 2013 had allowed mutual funds to issue re-investment units alongside cash dividend.
In 2015, the commission, however, backtracked on its early position and took initiative mainly to close the scope for issuing re-investment units or stock dividend by mutual funds.
BSEC chairman M Khairul Hossain at a recent meeting with stakeholders pledged that the commission would abolish bonus dividends for MFs.
Market experts said that the BSEC surprisingly favoured the AMCs by allowing them to extend tenure of the MFs by another 10 years.
BSEC officials said that that the commission officially did not take any specific decision on the issue of bonus dividend issuance facility for MFs. The issue was discussed at a meeting with the stakeholders where the chairman pledged that he would bar the AMCs to declare bonus dividend, they said.
Source: http://www.newagebd.net