B Mirror Report: Bangladesh’s mutual fund sector, once considered a key component of capital markets worldwide, has fallen into deep distress, with allegations that trustee institution Bangladesh General Insurance Company (BGIC) failed to adequately protect investors’ interests and properly supervise fund operations.
According to market observers, asset management companies (AMCs) have long been blamed for the poor state of the mutual fund sector. However, experts argue that trustees also bear significant responsibility, as they are legally required to oversee fund management, ensure compliance with regulations, and safeguard investors’ assets.
BGIC, the trustee of the country’s second-largest number of mutual funds, has been accused of negligence and inadequate supervision. The Bangladesh Securities and Exchange Commission (BSEC) has already imposed fines totaling Tk 4 crore on the company in two separate actions and recently issued further warnings over its failure to fulfil trustee responsibilities.
Under the Mutual Fund Rules, 2001, trustees are entitled to seek information and periodic reports from asset managers, monitor fund operations, and take corrective measures if any activities violate securities laws or regulations. They are also responsible for ensuring that fund transactions and asset transfers comply with the law.
A former BSEC commissioner, who previously oversaw the mutual fund division, said trustees have extensive responsibilities, including auditing and verifying assets held by custodians. He noted that investigations had uncovered several instances of trustee failures and negligence, which were formally reported to the regulator.
According to BGIC’s website, the company serves as trustee for 13 listed and five non-listed mutual funds. The 13 listed funds have a combined paid-up capital of Tk 2,148.72 crore. However, due to alleged mismanagement and irregularities, the average unit price of these funds has dropped to Tk 4.79, less than half of their Tk 10 face and issue value.
BSEC fined BGIC Tk 3 crore on October 21 last year for failing to properly supervise six mutual funds managed by LR Global. Separately, the regulator imposed another Tk 1 crore fine over irregularities involving a Tk 4 crore investment by the Vanguard AML BD Finance Fund in AFC Health in 2017, saying BGIC had failed to exercise adequate oversight as trustee.
More recently, the commission warned BGIC over its performance as trustee of the Asian Tiger Sandhani Life Growth Fund, citing lapses in supervision and compliance with securities laws.
Responding to the allegations, BGIC Managing Director and CEO Ahmed Saifuddin Chowdhury said that under existing regulations, trustees are not responsible for safeguarding fund assets and cash holdings. He also argued that trustees do not play a role in investment decisions under trust deeds and claimed BGIC had regularly informed the BSEC about the AFC Health investment from 2017 to 2025 without facing objections.
He further questioned why BGIC had been penalised while the Investment Corporation of Bangladesh (ICB), trustee of another fund that also invested Tk 4 crore in AFC Health, had not faced any regulatory action.
The developments have reignited concerns over governance failures in Bangladesh’s mutual fund industry and the effectiveness of trustees in protecting the interests of millions of investors.
