B Mirror Report:  The Bangladesh Securities and Exchange Commission (BSEC) has issued detailed guidelines for the conversion of listed closed-end mutual funds into open-end funds, triggering strong investor interest in the sector.

Following the announcement, mutual funds witnessed a major rally on Monday, the first trading day of the week, with almost all listed funds posting price gains. Eight of the top 10 gainers on the Dhaka Stock Exchange (DSE) were mutual funds.

Market analysts said most closed-end mutual funds had long been trading at significant discounts compared to their net asset value (NAV). Investors are now expecting improved liquidity and a reduction in the gap between market prices and underlying asset values under the new policy, leading to increased buying interest.

Under the new BSEC rules, if a closed-end fund trades at more than a 25 percent discount to its NAV or face value for six consecutive months, the trustee will be required to call a Special General Meeting (SGM) of unit holders. Through a secret ballot, investors will decide whether the fund should be converted into an open-end structure or liquidated.

The conversion process will begin if at least 75 percent of unit holders approve the proposal.

According to market data, around 22 out of the existing 34 closed-end mutual funds may fall under the scope of the new policy. The six-month observation period is set to end on May 12, meaning the future of several funds could be decided this week.

Mutual funds delivered remarkable performances in Monday’s trading session. IFIL Islamic Mutual Fund-1, First Bangladesh Fixed Income Fund, PHP First Mutual Fund, AB Bank 1st Mutual Fund and Trust Bank 1st Mutual Fund all surged by 10 percent, hitting the circuit breaker limit.

Meanwhile, NCCBL Mutual Fund-1, EBL NRB Mutual Fund and LR Global Mutual Fund also gained more than 9 percent during the session.

BSEC has also set limits on the costs involved in the conversion process. Total expenses cannot exceed 1 percent of the fund’s total size. Asset management companies will receive up to 0.50 percent, while trustees can charge fees up to Tk 1 million.

To prevent market manipulation, the regulator has also included provisions to suspend trading of the funds after the announcement of the record date for voting.

Market experts believe the reform will improve transparency in the mutual fund sector and allow general investors to liquidate or withdraw their investments more easily.

BSEC spokesperson Abul Kalam said the initiative aims to ensure investor protection, address long-standing inefficiencies in the mutual fund industry and bring greater dynamism to the capital market.