The Supreme Court has cleared the way for the removal of LR Global Bangladesh Asset Management Company Ltd as the asset manager of DBH First Mutual Fund and Green Delta Mutual Fund.
The Appellate Division on Sunday stayed a High Court injunction that had stopped the securities regulator from approving the replacement process of LR Global. A week ago, a bench of the Chamber Judge also stayed the injection.
"The Supreme Court's stay order on the HC injunction means that there is no more legal hurdle to replacing the asset manager of the two listed mutual funds," Advocate Probir Niogi, lawyer representing the Bangladesh Securities and Exchange Commission (BSEC) told The Business Standard.
Another lawyer representing the mutual fund investors explained the implications of the latest legal development saying, "The Joint District Judge's Court of Dhaka may keep hearing the matter as a part of the regular trial. But as there is no injunction order valid right now, the regulator can remove the asset manager any day."
Following some unpleasant investment steps by the asset manager, over 70 percent of both the closed-end funds in October last wrote to the Bangladesh General Insurance Company (BGIC) ltd seeking cancellation of appointment of asset manager LR Global Bangladesh and appointment of IDLC Asset Management Ltd as the new asset manager.
The trustee on October 31 sought permission from the BSEC to go ahead with what the majority unit-holders instructed.
In the following week, the asset manager sought an interim injunction order from the First Court of Joint District Judge of Dhaka in Title Suit No 934 of 2019. And, as the court only agreed to issue a show-cause notice on why the removal attempt of LR Global will not be illegal. It did not issue any injunction order. The petitioner then moved the High Court.
On November 7, the High Court, after hearing the issue came up with a rule and issued an ad-interim injunction order, Md Mijanur Rahman, the lawyer for LR Global told The Business Standard earlier.
On December 1, the respondents along with the majority unitholders sought a stay order on the High Court injunction from the Chamber Bench and their plea was granted.
A week later, a full bench of the Appellate Division headed by the Chief Justice Syed Mahmud Hossain yesterday upheld the stay order.
Ahmed Saifuddin Chowdhury, managing director of the BGIC said, "We have been taking necessary steps to replace the asset manager of the two funds based on the majority of investors' demand. But the court injunction made us refrain from the process until today (Sunday). Now we are waiting for the BSEC decision over the matter as its approval is a must for replacing an asset manager."
Mutual fund rules set by the BSEC suggest that if investors owning over two-thirds units of any mutual fund want to change the asset manager of their fund, the trustee will act accordingly with permission from the securities regulator.