B Mirror Report:  The Bangladesh Securities and Exchange Commission (BSEC) has introduced a major policy change for the country’s open-end mutual funds, allowing them to reinvest annual profits instead of mandatorily distributing dividends to investors.

The decision was approved at the regulator’s 1,018th emergency commission meeting, chaired by BSEC Chairman Masud Khan, and was confirmed by BSEC Director and spokesperson Md. Abul Kalam.

According to a BSEC statement, trustees of open-end mutual funds may now, based on proposals from asset managers and considering the interests of investors and the capital market, retain annual profits within the fund rather than distribute them as dividends.

Previously, open-end fixed-income schemes were required to distribute at least 70 percent of their profits as dividends, growth schemes 30 percent, and other open-end funds 50 percent. The new policy removes these mandatory payout requirements.

The commission had abolished the Reinvestment Unit (RIU), or bonus unit, mechanism in 2019 following controversy, making cash dividends compulsory and limiting funds’ ability to reinvest earnings.

The reinstatement of reinvestment opportunities has drawn positive attention from asset managers, many of whom say the new framework provides benefits similar to the former RIU system, although the mechanism differs.

BSEC Executive Director and spokesperson Md. Abul Kalam said the decision was taken in the interest of investors. He noted that cash dividend distributions are subject to a 15 percent tax, whereas reinvesting profits increases a fund’s asset base, potentially enabling investors to receive higher returns when they redeem their units.

The regulator believes the measure will reduce the tax burden on investors, strengthen fund assets, and support the long-term growth of Bangladesh’s mutual fund industry.