Merchant banks now need to have prior permission from SEC ==> Appointing and dismissing MDs

FE Report (June 16, 2011)

Merchant banks will have to take prior permission from the securities regulator for appointing and dismissing their managing directors as per a fresh amendment brought to Securities and Exchange Commission (SEC) Rules 1996, officials have said.

The amendment, approved by the SEC on Wednesday, has also defined the qualifications of managing directors (MDs) of merchant banks and areas of their jurisdiction to carry out responsibilities.

The move comes after some recent incidents of appointing a few controversial persons, whose roles as managing directors were not supportive to the stock market.

The decision came at a commission meeting, chaired by SEC chairman Professor Dr. M Khairul Hossain, held at the SEC office.

The SEC also approved the prospectus of LR Global Bangladesh Mutual Fund 1 and the restructuring proposal of AB Bank First Mutual Fund to reduce its size.

SEC spokesman Md Saifur Rahman said the regulator has approved the proposed amendment to Securities and Exchange Commission (Merchant Bankers and Portfolio Managers) Rules 1996, by bringing some changes to the existing rules.

"From now on, the merchant banks will have to take permission from the SEC to appoint or dismiss their managing directors," Mr. Rahman said.

According to sources, during the recent stock market debacle the managing directors of two merchant banks did not play positive roles in the stock market.

The regulator then asked the merchants banks to dismiss their managing directors. But the merchant banks did not comply with the regulator's instruction.

The SEC, in its next step, sought public opinion to amend the Securities and Exchange Commission (Merchant Bankers and Portfolio Managers) Rules 1996 in an effort to ensure positive roles of merchant banks.

After examining public opinion, the SEC finalised the draft of the amendment to the rules of merchant bankers and portfolio managers and finally approved it at Wednesday's commission meeting.

At the meeting, the SEC approved the prospectus of LR Global Bangladesh Mutual Fund 1, which will go public with a size of Tk 3.0 billion.

Of the Tk 3 billion, Taka one billion will be collected through pre-IPO (initial public offering) placement and Tk 1.5 billion through IPO. The sponsors will contribute the remaining amount of the fund.

LR Global is working as an asset manager of this mutual fund.

The SEC also approved the restructuring proposal of AB Bank First Mutual Fund to go public with a size of Tk 1.5 billion instead of its previous size of Tk 3.5 billion, approved by the regulator.

Earlier, the SEC approved the trust deed and investment agreement deal of this mutual fund.