B Mirror Report: The securities regulator has effectively halted the local operations of LR Global Bangladesh Asset Management Company by cancelling its appointment as the asset manager of six close-ended mutual funds, citing grave breaches of securities laws and failure to safeguard investors’ interests.
The affected funds are 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.
Following the regulatory action, LR Global is no longer managing any mutual fund in Bangladesh. The Bangladesh Securities and Exchange Commission (BSEC) has also moved to revoke the company’s registration.
The decision was approved at a BSEC board meeting earlier this month, according to a disclosure issued through the stock exchanges.
Officials of the commission said the move came after identifying violations of securities laws and Mutual Fund Rules, failure to discharge fiduciary responsibilities, conflict of interest, and actions that caused substantial harm to unitholders.
A key finding involved investments in Quest BDC Limited, formerly known as Padma Printers & Colors Limited. According to the regulator’s review, six funds managed by LR Global invested around Tk 23.6 crore to acquire a 51 per cent stake in the company. Subsequently, additional share money deposits were converted into ordinary shares.
The BSEC noted that the investment was made without adequate financial assessment, in breach of the Mutual Fund Rules, 2001, resulting in considerable losses for investors.
The commission also identified pricing irregularities. Although Quest BDC shares were approved at Tk 10.60 each, LR Global purchased them at a significantly higher price of Tk 289.48. Meanwhile, a sister concern acquired shares at lower rates, creating what the regulator termed a clear conflict of interest.
Furthermore, the watchdog observed that more than 15 per cent of a single company’s paid-up capital was acquired using funds from a single mutual fund, exceeding regulatory limits. The appointment of a director and managing director at Quest BDC without approval from the trustee or the commission was also found inconsistent with mutual fund regulations.
The regulator stated that the investment in Quest BDC has generated no returns since 2022.
As the company’s shares are currently traded on the over-the-counter (OTC) market, exit opportunities remain limited, leaving investors exposed to further risks.
BSEC spokesperson Md Abul Kalam said the asset manager failed to uphold its fiduciary duties, committed serious regulatory violations, and acted against the interests of unitholders.
The trustees of the affected funds have been directed to initiate legal steps and begin the process of appointing a new asset manager. However, no replacement has been finalised yet, as the funds are expected to undergo audits before any transfer of management.
Earlier, in October last year, several individuals associated with Quest BDC including LR Global’s chief investment officer were permanently barred from participating in capital market activities. Financial penalties were imposed, and allegations of money laundering were referred to the Anti-Corruption Commission.
Market observers described the latest action as one of the toughest enforcement measures taken against an asset management company in recent years.
