SEC alters mutual fund rules

An individual investor will be allowed to receive up to Tk 1 crore units of a mutual fund in pre-IPO placement, an official said yesterday.

The Securities and Exchange Commission approved an amendment to the Mutual Fund Rules 2001 at a meeting with SEC Chairman Prof M Khairul Hossain in the chair.

“Though it was proposed in the draft amendment that an individual can take an unlimited amount in pre-IPO placement of a mutual fund, the commission set a limit on it, taking into account public opinions,” said Saifur Rahman, the spokesman for SEC

In line with the previous rules, an individual was not allowed to receive more than Tk 25 lakh units of a mutual fund in pre-IPO placement.

Rahman said the commission modified two other proposed clauses in the rules.

The commission defined the institutional investors. Pension fund, provident fund, endowment fund and venture capital fund would be considered institutional investors, said Rahman, also an executive director of SEC.

The regulator has allowed the asset management companies to provide investment management and advisory services to their clients.

“However, the asset management companies would need to inform the regulator about it before providing such services,” he said.

Another major change in the rules is an increase of IPO quota of the mutual funds from 10 percent to 15 percent. It means, in every IPO, 15 percent of the issue size will be reserved for mutual funds.

The minimum public offering size of the mutualfunds will be 25 percent, instead of 50 percent, of the total fund size.

At yesterday's meeting, the market watchdog extended the tenure of unit funds of the state-run Investment Corporation of Bangladesh (ICB) by one year to December 2012.

“Considering the current market situation, the commission extended the tenure of the unit funds which were scheduled to be redeemed by December,” the SEC executive director said.

Earlier, ICB urged the commission not to liquidate or extend the tenure of the funds.

SEC formed a three-member committee to modify merchant bank and portfolio manager rules in an effort to update the regulations.

“The commission directed the committee to submit a set of recommendations on the amendment within 15 working days after issuing an office order to this effect,” he said.

The regulator also approved the prospectus of a Tk 50-crore mutual fund, closed-end in nature, at the yesterday's meeting.

National Life Insurance (NLI) Company is the sponsor of the fund styled “VIPBNLI First Mutual Fund”, Rahman said.

The sponsor will contribute Tk 10 crore to the 10-year fund, while another Tk 10 crore will be raised through pre-IPO placement and the rest Tk 30 crore from the public through IPO.

VIPB Asset Management Company is the manager of the fund, while the ICB is the trustee and custodian.

It will be the first mutual fund whose name starts with the name of the asset management company, in line with a regulatory requirement.

Source: .The Daily Star (Thursday, October 6, 2011).