SEC mulls extension of ICB funds' tenure
The stockmarket regulator plans to extend the tenure of unit funds of the state-run Investment Corporation of Bangladesh in a move to boost the markets.
“Considering the current market situation, the commission is thinking of extending the tenure of the unit funds which are scheduled to be redeemed by December,” said an official of the Securities and Exchange Commission.
Earlier, the ICB urged the commission on several occasions not to liquidate or extend the tenure of the funds, but the regulator did not agree.
“If the funds are liquidated as scheduled, it may create extra sales pressure in the secondary market, when the market suffers a downward trend,” the official said.
The SEC is so thinking after the ICB once again requested the regulator to extend the tenure.
The funds, which have no maturity period, are scheduled to be pulled out from the secondary market by December this year as per a regulatory direction.
Earlier on Monday, ICB Managing Director Md Fayekuzzaman at a press briefing said they also requested the finance ministry to take steps in this regard. “The ministry assured us that the tenure of the funds will be extended,” he said.
The ICB went to the finance ministry as the funds were launched between 1980 and 1996 under the now defunct 'Controller of Capital Issues' of the ministry.
The stockmarket has been facing high volatility since the price debacle in January along with continuous erosion in investor confidence.
Mutual funds play an important role in a market, as they can assist the market through buying support. The ICB's unit funds, which are perpetual in nature, declare healthy dividends for the unit holders every year.
A perpetual or open-ended mutual fund is a professionally managed collective investment scheme that has unlimited lifetime and size. The fund manager pools money from many sponsors or investors through its selling agents and invests it in stocks, bonds and short-term money market instruments, and pays out dividends to the unit holders annually.
The SEC in 2007 asked the ICB to bring its mutual funds under 'SEC (Mutual Fund) Rules 2001' so the regulatory agency can control the funds under a set of rules to ensure the investors' interests.
Upon a request from the ICB, the SEC then waived the eight mutual funds from its rules, and gave no directions or conditions about their maturity period. The ICB has since been operating its eight mutual funds.
But the SEC in December 2009 issued a notification instructing that the mutual funds having no maturity period and that have passed 10 years after listing, to pull out of the market by December 2011.
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