B Mirror Report :The Bangladesh Securities and Exchange Commission (BSEC) has issued a directive that has caused a great deal of concern in the capital market’s closed-end mutual fund industry. 31 of the 34 listed closed-end mutual funds are now vulnerable to liquidation or conversion into open-end funds due to this new ruling.

According to a government gazette published on November 12, if a fund’s average market price falls more than 25 percent below its issue price or net asset value (NAV) and this condition continues for six consecutive months, the trustee must convene an extraordinary general meeting (EGM) of the unit holders.

An analysis of data published by the Dhaka Stock Exchange (DSE) on Tuesday (December 23) shows that only three funds Prime Finance First Mutual Fund, CAPM BDBL Mutual Fund-1, and Reliance One are trading above the threshold set by BSEC. The remaining 31 funds are currently trading below the required benchmark. Under the new regulation, decisions regarding the future of these funds will require the support of at least 75 percent of unit holders’ votes through a secret ballot. At the same time, investors may also decide at the meeting to change the fund manager or trustee if they wish.

Speaking to the media, BSEC Director and Spokesperson Abul Kalam said that investors have long been deprived of fair dividends. Many mutual funds are trading at prices significantly lower than their declared NAVs, which is not consistent with normal market behavior. He further stated that no new closed-end mutual funds will be approved in the future, and internationally this structure is also being gradually phased out. The commission has taken this strict stance to restore investor confidence and establish discipline in the mutual fund sector.

However, while some market analysts view the initiative positively, they are also warning about potential risks. According to them, if many funds move toward liquidation or conversion at the same time, it could create substantial selling pressure in the market.

They also believe it is essential to ensure transparent and accurate disclosure of net asset values and to develop a culture of returning investors’ money at the end of a fund’s tenure instead of repeatedly extending it. Otherwise, even skilled fund managers with good performance records may suffer due to overall sectoral weaknesses.