The Securities and Exchange Commission or SEC has indefinitely suspended trading through all BO accounts of Race Asset Management.
The market manipulation watchdog on Monday also directed the trustee institutions to take full control of the BO accounts and give details of the accounts to the SEC within seven working days.
Shibli Rubaiyat-Ul-Islam, chairman of SEC, issued the directives following allegations of breaches of the custodian condition in the management of mutual funds.
SEC Executive Director Mohammad Rezaul Karim told bdnews24.com: "An investigation team is working on Race Asset Management over the mutual fund management issue. Based on their recommendation, the BO accounts will remain closed until further notice".
The directives came amid reports on a freeze on bank accounts of Race and the mutual funds it manages.
The Bangladesh Financial Intelligence Unit ordered the freeze on Jun 10 for 30 days until Jul 9, according to the reports.
Launched in September 2008, Race manages 12 mutual funds, but after over one and a half decades, investors are not getting back expected profits from its term and non-term mutual funds.
They have questioned the management of the funds as the profits from listed and non-listed funds remain low.
It was also reported that Race invested more than Tk 10 billion of its mutual assets in highly risky ventures - all of it in non-listed firms, making the return of the small investors funds uncertain.
Race invested over Tk 750 million in erstwhile Farmers Bank, although it was sinking, along with Tk 870 million in a stock brokerage company and different securities.
Best Holdings convertible bond BFISPV is also on the list of Races risky investments. It was reported that Race invested Tk 2.5 billion in the non-listed bond.
Farmers Bank was renamed to Padma Bank in 2019 after its ownership and management changed in 2019 when it was on the brink of collapse in 2017.
Chowdhury Nafeez Sarafat, chairman of Race, became chairman of the loan scam-hit Padma Bank.
He resigned from the bank five years after assuming the position, with no changes to its condition.
Recently, the Bangladesh Bank decided to merge the Padma Bank with the Exim Bank.
Nafeezs name as chairman is currently not on Race website. It does not contain information on the firms directors either.
The SECs order, published on its website, states that Race Asset Management linked the BO IDs with associated brokerage firms or added them to mother accounts in breach of custody requirements.
The brokerage houses include Multi Securities Services, The Smart Trade Limited, and Trust Bank Securities Limited.
The order noted that the breach of the regulations put the interests of investors at stake and the move aimed "to protect the interests of investors".
Race manages 12 mutual funds with BRAC Bank and the state-owned Investment Corporation of Bangladesh, or ICB, as custodians.
Mamunur Rashid, compliance officer at Race Asset Management, told bdnews24.com: "All fund shares managed by Race are held as DP accounts with BRAC Bank and ICB. A check with CDBL will confirm that 100 percent of the shares are properly accounted for. All share transaction information is preserved."
He commented that there is no discrepancy or variation in the number of shares. "Each mutual fund has its own website. The websites will also provide information on all shares. The most recently audited financial report contains information on the shares. "We will issue a statement to investors about this matter (Tuesday)," Rashid added.
The Central Depository Bangladesh Limited, or CDBL, holds updated information on electronic share preservation, transaction settlement, and share transfer.
As an asset manager, Race Asset Management PLC started its journey on Sept 24, 2008, and currently manages 12 mutual funds. Among the 37 mutual funds listed on the Dhaka Stock Exchange, or DSE, Race manages 10.
According to the Mutual Fund Regulations 2001 of Bangladesh Securities Exchange and Commission, shares purchased under a mutual fund are held in the custodians Depository Participant or DP. —bdnews24.com
