The securities regulator has directed LR Global Limited to pay back over Tk 548.1 million to its mutual funds (MFs) by June 30 next, greater part of which fund was invested in private equities 'unlawfully', officials said.
The regulator also imposed a penalty worth Tk 5.0 million on LR Global and an embargo on formation of new fund or scheme by the same fund manager within next one year.
According to another regulatory decision, Bangladesh General Insurance Company (BGIC) will have to pay a penalty worth Tk 2.5 million for not playing its due role as the Trustee of LR Global.
On the other hand, Hoda Vasi Chowdhury & Co has also been penalised Tk 0.5 million for delivering 'unqualified opinion' regarding the expenses realised from the MFs run by LR Global.
The decisions were taken at a commission meeting held Wednesday at the office of the Bangladesh Securities and Exchange Commission (BSEC).
Asked, Reaz Islam, the chief executive officer (CEO) of LR Global, said there were some mistakes while managing their MFs.
"We will address the issues through constructive way by working with the securities regulator," Mr. Islam told the FE.
At Wednesday's meeting the securities regulator approved the IPO (initial public offering) proposal of Olympic Accessories which will raise a fund worth Tk 200 million from public.
According to regulatory approval, Olympic Accessories will offload 20 million ordinary shares at an offer price of Tk 10 for each share.
As per the audited financial statement for the year ended on June 30, 2014 the company's earnings per share (EPS) and net asset value (NAV) per share are Tk 1.43 and Tk 16.34 respectively.
LR Global, a leading Asset Management Company (AMC), manages six MFs. They are: DBH First Mutual Fund, LR Global Bangladesh Mutual Fund One, Green Delta Mutual Fund, AIBL First Islamic Mutual Fund, MBL First Mutual Fund and NCCBL Mutual Fund-1.
The securities regulator earlier probed into the investment related anomalies allegedly executed by LR Global and later hearing was also held on the issues.
According a statement signed by BSEC executive director Mohammad Saifur Rahman, LR Global invested over Tk 485.6 million into non-listed private equities from the MFs as on June 30, 2014 by breaching the section 55 of the Securities and Exchange Commission (Mutual Fund) Rules, 2001.
As per the section 55(1) of the mutual fund rules, no mutual fund can invest funds of a company which is not listed with the capital market or tradable at the capital market.
MFs can invest in private placement shares of non-listed companies and money market by taking regulatory approval.
According to BSEC statement, LR Global realised Tk 59.40 million from its MFs as expense of running office and administrative cost although the fund manager has to meet such expenses from his own income.
The BSEC statement also said LR Global realised over Tk 3.1 million from its MFs for solving legal cases.
As a result, the BSEC fined Hoda Vasi Chowdh & Co Tk 0.5 million for its 'unethical practice' while giving clean audit report regarding the company's administrative and office expenses.
The regulator also imposed a penalty worth Tk 2.5 million on the BGIC as it failed to play its due role as the trustee of LR Global.
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