Express (August 21, 2011)

The securities regulator has rejected the proposal of bonus dividends by the fund managers of closed-end mutual funds, officials said.

The decision came at a commission meeting, chaired by the Securities and Exchange Commission (SEC) Chairman Professor M Khairul Hossain, held at the SEC office last week.

Recently, some fund managers submitted a number of proposals, including an opportunity for closed-end mutual funds to offer bonus shares.

An SEC official said the commission has decided not to approve the proposal of offering bonus shares against the units of closed-end mutual funds considering the nature of such funds.

"The opportunity of bonus offering will contradict with the nature and characteristics of closed-end mutual fund. That's why the regulator has rejected the proposal for the sake of market's discipline," the official said.

On June 26, 2008, the SEC revised the Mutual Fund Act 2001, imposing restriction on the bonus and right offers by closed-end mutual funds.

In November 2009, the High Court said in its verdict that the closed-end mutual funds, which went public before the amendment of mutual fund act, will be able to offer bonus and right shares.

Recently, Bangladesh Association of Asset Management Companies (BAAMC) sought regulatory consent in offering bonus dividend against the units of closed-end mutual fund in an effort to increase investors' concentration to mutual funds.

Some other mutual funds, including AIMS, said they are not in opposition of BAAMC's proposal of offering bonus shares.

"The problem was earlier solved by the High Court. So, the fresh proposal is nothing but to disturb the market," Yawer Sayeed, the Managing Director & CEO of AIMS of Bangladesh, told the FE.