Dhaka, Bangladesh (BBN) - Bangladesh stock market regulator on Wednesday fined LR Global Bangladesh BDT 5.0 million, as a regulatory probe unearthed a number of gross violations of securities rules and misappropriation of hard cash of six mutual funds managed by the asset management company.
The asset management company also cannot float any new mutual fund for next one year.
Bangladesh Securities and Exchange Commission (BSEC) also fined Bangladesh General Insurance Company, the mutual funds’ trustee, BDT 2.5 million and Hoda Vasi Chowdhury and Co, its auditor, BDT 0.5 million, as they failed to comply with rules appropriately.
The BSEC also warned Standard Chartered Bank, the mutual funds' custodian, for failing to keep the assets safe, according to a statement following a regulatory meeting.
Earlier, the regulatory probe found that LR Global invested BDT 955.8 million in four private equity companies that were not registered with the commission, violating mutual fund rules.
However, the investment stood at BDT 485.6 million as of June last year, and the BSEC directed LR Global to return the amount to the mutual funds.
LR Global also charged six mutual funds more than BDT 60 million as additional fees, which was not announced in the prospectuses, to bear the fund manager's office and staff costs and legal issues.
However, the mutual fund rules say that the fund managers will bear such costs from their own income.
The BSEC further instructed the asset management company to return the BDT 60 million to the mutual funds.
The probe also found LR Global’s violation of securities law in public subscription of three other mutual funds, managed by the same asset management company.
But as per mutual fund rules, an asset management company cannot invest or lend the money of one of its schemes to another.
LR Global transferred money from the fund’s bank account to its own bank account for its own purposes. The company also invested the mutual fund's money in low interest generating fixed deposit receipts (FDR), instead of high interest generating FDRs, causing financial losses for the mutual funds.
BBN/SSR/AD-26Feb15-12:19 pm (BST)