Investors threaten tougher movement

A group of retail investors took to the streets yesterday demanding withdrawal of loan restrictions on mutual funds and retraction of the announcement of pulling out the funds having no maturity period from the market.

The investors, who have investment in mutual funds, staged demonstration in front of both Dhaka Stock Exchange and Securities and Exchange Commission under the banner of 'Share Market Retail Investors Forum'.

They also met SEC Chairman Ziaul Haque Khondker and placed their demands to him.

They said regulator's intervention led to a sharp decline in the prices of each and every mutual fund during the last few weeks that resulted in huge losses to them.

“If we now bear the losses caused by SEC's move, we would lose everything,” MA Bashar Dablu, the forum's convener, pointed out during the meeting with the SEC chief.

The lifting of SEC restrictions can save their capital, Dablu said.

The SEC chief assured the investors of considering their demands.

The market regulator on December 17 set new criteria for margin loans for mutual funds after about two months of suspension. The regulator said mutual funds must trade in a limited range to qualify for margin loans.

The funds that will trade 7.5 percent higher than their latest NAV (net asset value) will not qualify for the loans. It means if a mutual fund has Tk 100 in NAV per unit and trades only up to Tk 107.50 (7.5 percent higher than NAV), margin loans can be sanctioned for the fund.

Later on December 23, the SEC announced that mutual funds having no maturity period would have to pull out of the market by December 2011.

The decisions took a heavy toll on the mutual fund sector.

The agitated investors told journalists that they would go for tougher movement such as 'hunger strike unto death', if the SEC does not meet their demands.

“We will have no other way but going for hunger strike unto death,” Dablu said.

New criteria for mutual fund loans

The stock market regulator yesterday set new criteria for margin loans for mutual funds after about two months of suspension.

To qualify for margin loans, mutual funds must trade in a limited range, according to the latest decision.

The funds that will trade 7.5 percent higher than their latest NAV (net asset value) will not qualify for the loans.

The new ceiling means if a mutual fund has Tk 100 in NAV per unit and trades only up to Tk 107.50 (7.5 percent higher than NAV), margin loans can be approved for the fund.

The decision will be effective from Sunday.

The Securities and Exchange Commission issued a directive yesterday withdrawing restrictions on margin loans for mutual funds, officials said.

In a circular on October 26, the SEC directed merchant banks, portfolio managers, brokers and dealers to suspend margin loans.

Market experts said only a few mutual funds would now qualify for margin loans under the new criteria.

The current market prices of most mutual funds are much higher than their NAV.

Currently, 19 mutual funds trade on bourses with their combined issued capital of around Tk 500 crore.

Investors go on hunger strike

A group of retail investors yesterday went on hunger strike in front of the Securities and Exchange Commission office demanding that the market regulator do not move for leave to appeal against a High Court order on a mutual fund case.

The investors, who have investments in mutual funds, took to the street with festoon and placard under the banner “Share Market Retail Investors Forum”, also demanded withdrawal of a ban on margin loan facilities to mutual funds imposed by the SEC on October 26.

They, however, called off the hunger strike after three hours on intervention by SEC Chairman Ziaul Haque Khondker.

The investors told the chairman that due to the case, mutual funds have not been giving dividends for a couple of years now.

But now, they said, the case has now been disposed of by the High Court. If the SEC appeals with the Supreme Court, the issue of dividends will remain pending once again.

The High Court handed down the verdict on November 8 allowing closed-end mutual funds to issue bonus or right issues.

The SEC chairman told the strikers that the commission would reach a decision on any move for leave to appeal after receiving the certified copy of the High Court verdict.

On the margin loan issue, Khondker assured them of considering their demand to lift restrictions on margin loan facilities to mutual funds.

Merchant bankers Saturday formed a new body with a pledge to develop the stock market further, making it as a source of fund for the country's industr

Chairman the Board of Trustees of Transparency International Bangladesh and former adviser to the caretaker government M Hafizuddin Khan joined MIDAS Financing Ltd as an independent director recently.

Chairperson of the company and former adviser to the caretaker government Rokia A Rahman welcomed him at the 160th board meeting of the company held in the city recently.

MIDAS directors Samson H Chowdhury, Shaikh A Halim, AJ Masudul Haque Ahmed, Mirza Ali Behrouze Ispahani, Md Shamsul Alam, Rina Kibria along with the Managing Director (cc) Shafique-ul-Azam, General Manager Md Atiar Rahman Ansary and Company Secretary Md Din Islam Miah were also present at the meeting.

SC halts HC order on MF shares

The Supreme Court on Wednesday halted for two weeks the High Court order on mutual funds to issue rights and bonuses shares.

Justice Mohammad Mozammel Hossain, a chamber judge at the Appellate Division, gave the order .

The High Court on Sunday held back its verdict given the same day, which allows mutual funds to issue rights and bonus shares, for seven days.

SEC's lawyer Mahmudul Islam asked for the halt as they would appeal against the verdict, M Zahir, the counsel for the petitioners, said.

Three investors in share markets Ibrahim Akand, Raihana Haque, Delwar Hossain petitioned the HC on Aug 28, 2008, challenging SEC's decision on Mutual Fund.

The SEC on July 22 amended the rule regarding mutual funds where it prohibited mutual funds to increase its paid up capital through issuing rights shares.

The decision also barred mutual fund operators to issue bonus shares as dividend.

Consequently, Mutual Fund faced massive fall in its shares prices, leading to discontent among small investors.

Bonus Share approved by Mutual Funds

The High Court (HC) yesterday handed down a verdict allowing closed-end mutual funds to issue bonus shares or rights issues.

The same day, the HC halted the operation of the verdict for a week after the Securities and Exchange Commission (SEC), the market regulator, sought more time to appeal against the verdict.

In line with the verdict, the mutual funds will have to seek permission for bonus shares from the SEC, which market analysts say is a usual procedure.

The verdict will be applicable to the mutual funds that had come to the market before the SEC brought some changes to the mutual fund rules.

The mutual fund operators now will be able to announce dividends that have been pending for long.

An HC bench comprising Justice Syed Mahmood Hossain and Justice Quamrul Islam Siddiqui passed the verdict following a writ petition challenging the modifications of mutual fund rules by the SEC.

Three investors -- Ibrahim Akand, Delwar Hossain and Raihana Haque -- filed the writ petition.

In response to the petition, the HC in August last year stayed the stock market regulator's ban on the issuance of bonus shares or rights issues for closed-end mutual funds.

The HC also stayed the dividend declarations by all mutual fund managers until disposal of the case.

In July last year, the SEC approved changes in mutual fund rules barring closed-end mutual funds from offering bonus shares as dividends or right issues to increase their capital base.

A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocks, bonds, and short-term money market instruments.

Dr M Zahir appeared for the writ petitioners, while Advocate Mahmudul Islam defended the SEC in court.

News from: Daily Star

Date: 09-11-09