The asset manager is allegedly dillydallying the transfer of management of the two closed-end mutual funds
LR Global (Bangladesh) Asset Management, as a part of its stretched litigation, has now filed a review petition against the Appellate Division verdict that cleared the way for firing LR as the asset manager of DBH First Mutual Fund and Green Delta Mutual Fund based on majority unitholders' will and the securities regulator's order.
The asset manager has been dillydallying the transfer of management of the two closed-end mutual funds since Bangladesh General Insurance Company (BGIC), the trustee of the two funds, began to act upon majority unitholders' instruction to remove LR Global and appoint IDLC Investment to manage the funds.
Initially, in early November last year, the asset manager filed a writ petition seeking a High Court order not to remove it. It had sought court protection based on Cardinal Principle and demanded for reasoning of its removal attempt.
However, as mutual fund rules of the securities regulator simply dictates that an asset manager must go if investors of two-third units of a mutual fund want and no reason needed to be mentioned there.
LR lost the first court battle, and the Bangladesh Securities and Exchange Commission (BSEC) on December 22, 2019 directed the trustee to move ahead with the asset manager replacement plan.
The trustee had to stop again as the asset manager filed an appeal with the BSEC, which later was rejected in February 2 this year and the trustee again began the asset manager changing process.
But within days, LR again filed a writ petition with the High Court seeking a stay order, and received it.
It argued in two points – firstly, it challenged the regulator's rejection of the appeal, and secondly, it highlighted the difference between trust deeds of the two funds and the BSEC mutual fund rules.
The trust deeds suggest that the trustee needs a valid reason to oust the asset manager, while the BSEC rules do not need it in case of at least two-thirds unitholders' instruction.
Barrister Mustafizur Rahman, a lawyer of the majority unitholder institutions, told The Business Standard that that is a weak argument as rules and regulations supersede any trust deed by nature.
However, by the second week of March this year, the Appellate Division of the Supreme Court vacated the High Court's stay and also an order for maintaining status quo by the chamber judge.
On March 12, the Appellate Division also ordered for a High Court hearing on the writ petition.
LR Global, since the second week of March, was dillydallying to respond to investors' will, and has been saying for the certified copy of Appellate Division order, while lawyer's certificate is enough to act upon.
As the certified copy has come out recently, the unitholders and the trustee have forwarded the matter to the BSEC this week.
On the other hand, the asset manager came up with a notice of review petition against the Appellate Division order. It sought the stay order to be restored.
Now the question among investors is, what is going to happen and what the regulator is going to do in this regard.
Barrister Ariful Islam, who represents LR at courts, told The Business Standard, "Since the matter is pending with the apex court, in our opinion, BSEC and BGIC should respect the process of the court and refrain from taking any steps that would prejudge the issue."
On the other hand, Barrister Mustafiz, the unitholders' lawyer, said, as the Appellate Division put up the stay order and the status quo order was not extended, the regulator and the trustee should move to oust LR.
BSEC Chairman Professor Shibli Rubayat-Ul-Islam told The Business Standard, "This is a sub-judice matter right now. Our legal department is handling the matter. We will act when the legal process settles."
Attorney General Mahbubey Alam, who represented the BSEC in Appellate Division in March, got surprised to know that the asset manager is still in job.
"It (how the asset manager is still in charge of the two funds) reflects the ineffectiveness of the securities regulator in terms of protecting investors' rights. We fought the case in the Appellate Division for the BSEC and the verdicts cleared the way to remove the controversial asset manager," he said while talking to The Business Standard on Wednesday.
"A review petition is the party's legal right, but that barely changes the course. The regulator should act immediately, the lawyer certificate was enough to remove the asset manager," said the top attorney of the state.
Why majority unitholders fired the asset manager
"This was an unlawful action by our competitors due to professional jealously. We have over 10 years of performance history and cash dividend distribution of over 56 percent and 32 percent for DBH and Green Delta Mutual Fund," said Reaz Islam, chief executive officer of LR Global Bangladesh.
For more than a decade, LR Global has distributed cash dividends equal to over 41 percent of what it had taken from unitholders of six mutual funds under its management, according to the firm's Head of Legal and Compliance Md Monowar Hossain.
Now the question is why the unitholders, including the two sponsor companies of the funds, are so desperate to fire the fund manager.
Md Muniruzzaman, managing director of ILDC Investments Ltd, one of the institutional unitholders seeking removal of LR, told The Business Standard that the asset manager's then chief operating officer in a TV programme once pledged for conversion of their funds after maturity.
"We saw a potential investment opportunity and invested in the funds. But later it also extended the tenure of the funds and breached the public trust," he said.
"Most importantly, we witnessed a horrible attempt for investing unitholders' money in a loss-making media portal company where the pricing was extremely high and non-transparent."
The regulatory authority also ordered to stop it and Anti-Corruption Commission is now investigating the matter suspecting money laundering.
"It is impossible for any investor to keep relying on an asset manager like this," said Muniruzzaman.
The asset manager bought each of the shares at the non-listed online media portal company Bangladesh News 24 Hours Limited at Tk12,500 on October 1 last year.
Two months earlier, one of the shareholders had sold 10,000 of the same company shares at face value of Tk100 only.
"We are frustrated to see LR global is still continuing to manage our assets," added the representative of one of the institutional unitholders.