The Bangladesh Securities and Exchange Commission has issued a new set of mutual fund regulations that introduce strict operational, governance, and investment standards, while prohibiting the approval of any new closed-end mutual funds.
The Bangladesh Securities and Exchange Commission (Mutual Fund) Regulations, 2025, came into effect immediately upon its gazette publication on Thursday.
Under the new rules, no new closed-end mutual fund will be approved in the future.
Tenure of existing closed-end funds will not be allowed to extend.
The existing closed-end funds may be required to convert into open-end funds or face liquidation if they fail to maintain their market value in line with the rules.
According to the regulations, if the average market price per unit of any closed-end fund falls by more than 25 per cent below its net asset value or purchase price for six consecutive months, the trustee may convene a special general meeting.
If three-fourths of the unit holders vote for conversion or liquidation, and the commission approves, the fund will either shift to an open-end format or proceed to dissolution.
The move is intended to protect investors from long-term losses and persistent discounts in the trading value of fund units.
After six months from the gazette publication, a fund may convert to an open-end fund if at least three-fourths of its unit holders approve the decision in a secret ballot at a special general meeting and the commission grants final approval.
Currently, 37 closed-end mutual funds are listed on the Dhaka Stock Exchange, whose terms will expire by 2032.
The regulations also prohibit directors, trustees, or asset managers from using mutual fund investments to gain directorship positions in any company.
Asset management companies are barred from investing in any business linked to their directors, affiliates, or associates to prevent conflicts of interest.
Each asset management company must have a minimum paid-up capital of Tk 10 crore, while existing ones with lower capital must raise it to the required level within three years.
聽The chairman and chief executive officer of an asset management company cannot be the same person.
Trustees, who act as custodians of investor interests, must now have a minimum paid-up capital of Tk 200 crore and will have one year to comply.
The trustee must ensure all transactions and assets of a fund are properly secured and monitored.
The commission also set new dividend and reporting requirements for mutual funds.
Closed-end funds must distribute at least 70 per cent of their annual net profits as cash dividends to unit holders, subject to trustee approval.
To improve transparency, fund managers must publish the daily Net Asset Value (NAV) of open-end funds, enabling investors to track profits or losses.
They must also disclose all income, expenses, investment risks, and portfolio valuations on a regular basis.
Concealing price-sensitive information will be treated as a punishable offence.
The regulations strictly limit investment scope.
Mutual fund money can only be invested in securities listed on the main board or SME platform of the stock exchange, in IPOs or rights offers of such securities, and in government securities.
Investment in unlisted shares, option trading, short selling, or forward transactions is prohibited.
Funds can only hold debt or Shariah-based securities with a minimum credit rating of 鈥楢鈥�. If any investment later falls below that rating or becomes delisted, it must be liquidated within six months.
Every registered fund must submit detailed quarterly reports on portfolio holdings in a format prescribed by the commission.
BSEC officials said the reform aims to increase investor protection, enhance market transparency, and ensure accountability among asset managers and trustees.