The state-run Investment Corporation of Bangladesh (ICB) twice withheld approval of the accounts of six mutual funds (MFs) managed by RACE AMC due to operational anomalies and its managing director's absence from trustee committee meetings.
The state-run corporation is the trustee of the funds. Without its approval of the annual accounts, which give a detailed record of money received and spent, the pooled funds could not publish financial statements for FY25 and FY26. As a result, unitholders have been unable to know their actual financial positions.
The funds in question are EBL 1st Mutual Fund, Trust Bank 1st Mutual Fund, 1st Janata Bank Mutual Fund, IFIC Bank 1st Mutual Fund, First Bangladesh Fixed Income Fund and EXIM Bank 1st Mutual Fund.
Having failed to publish the financial statements, these funds could not hold unitholders' meetings for two consecutive years.
Talking to the FE, ICB officials said they had refrained from approving the accounts of RACE-managed funds following a bitter experience with another asset manager, Universal Financial Solutions (UFS), that embezzled money from mutual funds.
ICB had approved accounts of UFS-managed funds, having them signed by UFS Managing Director Hamza Alamgir, although he did not attend trustee meetings.
Later, it was discovered that the UFS MD had fled with a substantial amount of money from some portfolios. The embezzled funds could not be recovered even after the intervention of the High Court (HC).
Preferring anonymity, a senior ICB official said two of their colleagues were frequenting the office of the Anti-Corruption Commission over cases linked to the UFS-managed funds.
"We are not in a position to approve annual accounts of the RACE-managed funds without any physical presence of its managing director or chairman at the meeting with us," said an ICB official wishing not to be named.
As per the rules, financial statements of MFs must be signed by the managing director or chairman of the AMC concerned. The signatories are also required to remain present at meetings with the trustee committee.
RACE's managing director sent signed documents, but he was not present at meetings with the trustee committee. "Had he been abroad, he should have validated the signed documents via the relevant high commission office of Bangladesh. He didn't do that too."
Trustees are legal owners of MFs. "The trust deed act allows the trustee to adopt any measure required for securing the interest of unitholders," said the ICB official.
There are other factors that contributed to the cautionary stance by the ICB.
A major operational anomaly emerged over RACE's claim that it had invested a significant amount of money from its funds in corporate bonds issued by Regent Spinning, a sister concern of Habib Group.
The ICB filed a lawsuit after failing to recover money from Regent Spinning. The defendant (issuer) told the court that RACE would have to prove the claimed investment.
The Corporation later sought bank transaction reports from RACE but has not received them.
Against the claimed investments in Regent Spinning, shares of Regent Textile, another sister concern of the conglomerate, were kept as collateral, according to RACE. But those shares are not in the hands of the trustee.
RACE also purchased bonds issued by Best Holdings, a listed company, with unitholders' money, on condition that 75 per cent of the assets would be liquidated at maturity and the remaining 25 per cent converted into shares of Best Holdings.
Although the conversion value was fixed at Tk 35 each, the conversion was executed at Tk 65 each in breach of the rules.
Moreover, RACE representatives sat on the board of Multi Securities after putting money in it, which was not lawful. Multi Securities was deployed as a third party in transactions between the issuer companies and the AMC.
"Some funds were transferred into the account of Multi Securities first in case of investments in non-listed securities," said the ICB official, adding that all these anomalies had been conveyed to the securities regulator.
Mamunur Rashid, head of compliance at RACE, could not be reached by phone for comment despite several attempts.
