LR Global Bangladesh Asset Management Company CEO Reaz Islam, along with former chief of the securities regulator Shibli Rubayat Ul Islam, has been banned from the capital market forever due to their connivance in causing harm to investors of six mutual funds.
The Bangladesh Securities and Exchange Commission (BSEC), on its 978th commission meeting, also decided to order Reaz to bring back Tk90 crore to the six close-end mutual funds it had previously invested illegally. If Reaz fails to ensure it in 30 days, he will pay Tk 98 crore in fines, while two other directors of the asset management firm, George M Stock III and Rezaur Rahaman Sohag, will pay Tk 1 crore in fines each.
LR Global will lose its job as the manager of the six funds—NCCBL Mutual Fund-1, LR Global Bangladesh Mutual Fund One, AIBL First Islamic Mutual Fund, MBL First Mutual Fund, DBH First Mutual Fund and Green Delta Mutual Fund, BSEC said in a press statement.
Bangladesh General Insurance Company Limited will pay Tk 3 crore fines for its failure to protect unitholders’ interest as the trustee.
BSEC said, LR Global invested Tk23.6 crore from the six mutual funds in a delisted, defunct company Padma Printers and Colour Limited to acquire its 51% shares at a sky-high price of Tk189.48 apiece, despite its negative earnings and asset value.
Changing Padma’s name to Quest BDC, Reaz appointed his men to the board of the company to represent the six funds despite their having no connection with the funds.
Further injected over Tk 45 crore from the funds into the company at a rate of Tk15.88 per share, having a face value of Tk10.
The capital raising of Quest BDC to Tk50 crore from Tk1.6 crore did not involve any price-sensitive information, an extraordinary general meeting, and there was no lock-in for the new shares. BSEC investigators found a connivance of the then BSEC chief and Reaz.
The regulator fined each of the representatives of the mutual funds to Quest BDC board Tk 1 crore fine separately.
BSEC will write to the Financial Reporting Council to take action against Shafiq Basak & Co Chartered Accountants for its failure to paly its role as the auditor of the Quest BDC financial statement for 2023.
Quest BDC invested nearly Tk25 crore Thyrocare Bangladesh Limited where merchant bank City Bank Capital Resources Limited suggested a pirce of Tk 52.25 apiece for Thyrocare, a private company where LR Global previously invested from the mutual funds.
The valuation was done in connivance of Reaz and City Bank Capital CEO Ershad Hossain, said BSEC.
The mutual funds’ asset transfer to Thyrocare from Quest BDC was a money laundering, said the regulator and it decided to forward the matter to the Anti Corruption Commission for further investigation.
