The Bangladesh Securities and Exchange Commission (BSEC) has allowed closed-end mutual funds to reinvest their entire annual income instead of distributing it as dividends, giving fund managers greater flexibility to pursue long-term capital growth.
The decision was approved at the regulator’s 1,018th emergency commission meeting chaired by BSEC Chairman Masud Khan on Tuesday, BSEC said in a press release on Wednesday.
Under the new policy, a trustee may, based on a proposal from the asset manager, approve the reinvestment of a fund’s earnings at the end of a financial year after considering the interests of investors and the capital market.
Previously, closed-end mutual funds were required to distribute most of their annual income as dividends.
Many long-term investors opposed the mandatory payouts because dividend income attracted taxes, reducing after-tax returns and limiting the benefits of compounding, especially when reinvestment offers opportunities in undervalued stocks.
The regulator said the revised framework will allow trustees to decide whether retaining earnings for reinvestment would better serve investors while strengthening the fund’s asset base.
