HC allows tenure extension of EBL First Mutual Fund

The High Court yesterday upheld the decision of closed-end EBL First Mutual Fund's trustee and asset manager to extend its tenure for another 10 years.

Closed-end mutual funds are investment tools that pool a fixed amount of money for a certain period from investors and re-invest them into stocks, bonds and other assets.

Yesterday the HC bench of Justice JBM Hassan and Justice Md Khairul Alam rejected a writ petition filed by The City of London Investment Management Company (CLIM) challenging the decision.

The CLIM filed the petition on October 21 last year stating that the fund manager had not sought unitholders' approval for the extension.

This was a violation of rule 50B of the Bangladesh Securities and Exchange Commission (Mutual Fund) Rules, 2001, it said.

Moreover, the extension contradicted what is stated in the fund's prospectus, it said.

On January 24, 2010, the stock market regulator fixed the tenure of all closed-end mutual funds at 10 years "realising the benefits of investors and development of the capital market", said its notice.

However, on September 16 last year, the BSEC extended the tenure of closed-end mutual funds by another 10 years following calls from some asset management companies.

This led to many asset managers extending their funds' tenures.

On August 5 this year, Bangladesh Race Management Private Company decided to extend EBL First Mutual Fund's tenure by another 10 years.

The CLIM then filed the writ petition. On hearing it the HC sought to know why the respondents will not be ordered to liquidate the fund and distribute the proceeds among unitholders.

It also ordered the asset manager, Bangladesh Race Management Private Company, not to take any asset management fee until the ruling was disposed of. The Investment Corporation of Bangladesh is the fund's trustee.

The latest HC decision lifts all bars on running activities of EBL First Mutual Fund.