B Mirror Report: The Bangladesh Securities and Exchange Commission (BSEC), the stock market’s regulating authority, has made an unprecedented move to bring discipline and openness back to the mutual fund industry. LR Global Bangladesh Asset Management Company Limited, one of the top asset management companies in the nation, has been relieved of its oversight of six funds. Concurrently, the Commission has started the procedure to revoke the business’s registration or license.

A lengthy investigation by the BSEC found evidence of severe financial irregularities, violations of investment regulations, and activities contrary to the interests of general investors by LR Global. The company has been stripped of control over DBH First Mutual Fund, Green Delta Mutual Fund, AIBL First Islamic Mutual Fund, LR Global Bangladesh Mutual Fund-1, NCCBL Mutual Fund-1, and MBL First Mutual Fund.

It is noteworthy that Riaz Islam served as the Chief Investment Officer of the company, while star cricketer Shakib Al Hasan and journalist Rezaur Rahman Sohag were associated with it as advisers.

The Commission’s investigation revealed that LR Global used funds under its management to purchase a large volume of shares in Quest BDC PLC (formerly Padma Printers). While the shares of this stagnant and loss-making company were trading at only Tk 13 in the market, LR Global purchased them at a massive premium of around Tk 289 per share. This investment severely harmed the interests of general unit holders and violated multiple provisions of the Mutual Fund Rules, 2001.

The BSEC also found evidence of a dual policy. While LR Global purchased the shares at Tk 15.88 per share for the concerned funds, its own affiliated entity, LRG Ventures Limited, acquired the same shares at only Tk 10. As a result, the affiliated company benefited, while general investors were deprived of potential gains. Additionally, the company ignored the regulatory restriction on acquiring more than 15 percent of the shares of any single company.

In violation of the law, Brigadier General Sharif Ahsan was appointed as the Managing Director of Quest BDC on behalf of AIBL First Islamic Mutual Fund. At the time, he was serving as the CEO of another securities house, which clearly violated BSEC Rule 13. The Commission also identified the asset manager’s direct involvement in the board of another company without trustee or regulatory approval as an act beyond its legal authority.

The most alarming issue is that since 2022, the large amount invested in Quest BDC has generated no profit. These shares are listed on the OTC market, where trading opportunities are limited. As a result, investors in these closed-end funds face a high risk of significant financial losses upon the funds’ maturity.

Earlier, on October 21 last year, in an order addressing these irregularities, Riaz Islam and former BSEC Chairman Professor Shibli Rubayat-Ul-Islam were permanently banned from participating in stock market-related activities. In addition, Riaz Islam, along with five directors and trustees, was fined Tk 1.09 billion, and the matter was referred to the Anti-Corruption Commission (ACC) for investigation into allegations of money laundering. Considering the overall situation, the BSEC believes LR Global has completely failed in maintaining integrity and accountability, making its removal necessary in the public interest.