Trading of six mutual funds managed by LR Global Bangladesh Asset Management has been suspended indefinitely after the Bangladesh Securities and Exchange Commission (BSEC) ordered the fund manager’s removal for misuse of investors’ money.
The trustee of the funds, Bangladesh General Insurance Company (BGIC), announced the suspension on Thursday following directives from the capital market regulator.
The six closed-end mutual funds include DBH First Mutual Fund, Green Delta Mutual Fund, AIBL 1st Islamic Mutual Fund, MBL 1st Mutual Fund, LR Global Bangladesh Mutual Fund One, and NCCBL Mutual Fund-1.
According to a notice by the Dhaka Stock Exchange, BGIC instructed all banks and brokerage houses maintaining accounts for these funds to immediately halt all debit transactions — including online banking — and suspend all trading activities conducted by LR Global.
The move, the trustee said, was aimed at protecting the interests of unit holders whose investments had been compromised.
BSEC officials said that the BGIC would give the management responsibility of the six mutual funds to another asset management company after clearing the accounts issues with the LR Global.
The BSEC in an investigation found that LR Global had misused nearly Tk 69 crore from the six funds by investing in Padma Printers, a defunct and loss-making company listed on the over-the-counter (OTC) market.
The investments were made in two phases. In the first phase, about Tk 24 crore was invested to acquire a 51 per cent shares in the closed and loss-making company at an inflated price. After acquiring these shares, the company’s name was changed to Quest BDC Limited.
After the name change, a further Tk 45 crore was invested from the six funds in a second phase, through a private placement of new shares. The shares were issued to increase paid-up capital of Quest BDC’s.
The regulator said the investment, made at highly inflated prices, essentially wasted investors’ money and violated the core principles of fund management and fiduciary responsibility.
On October 21, the BSEC banned LR Global CEO Reaz Islam for life for his role in the misuse of funds.
The regulator also ordered the company to return around Tk 90 crore, including interest, to the six mutual funds within 30 days.
If the repayment is not made within the deadline, Reaz Islam will face a fine of Tk 98 crore, while LR Global directors George M Stock III and Rezaur Rahman Sohag will each be fined Tk 1 crore.
Additionally, the BSEC fined BGIC and six other individuals a total of Tk 9.11 crore for their involvement in the irregularities.
