The investment has fallen foul of the authorities from the get-go
The Bangladesh Securities and Exchange Commission (BSEC) is set to ask LR Global Bangladesh to retrieve the Tk 50 crore it channelled of its six mutual funds into online news portal BDNews24.com within a month.
BSEC Chairman Shibli Rubayet Ul Islam confirmed the matter to Dhaka Tribune on Tuesday.
The investment has fallen foul of the authorities from the get-go.
A day after the announcement of the investment in October 2019, the stock market regulator had put a pause on the transaction and instructed the asset management firm to hand in all documents within 24 hours to verify if the transaction is compliant with securities rules.
As per the securities rules, an asset manager can invest in listed securities, initial public offerings, pre-IPO placement shares and securities that are transferrable in the money market. But BDNews24.com is a non-listed company.
LR Global has precedence for such transactions.
In 2015, the asset management firm was fined Tk 50 lakh for its investment in four non-listed private companies: Guardian Healthcare, Thyrocare Bangladesh, Property Investors and Tribeca Management.
The transaction then went through another legal mud bath: in July last year, the Anti-Corruption Commission filed a case against BDNews24.com Editor Toufique Imrose Khalidi on charges of acquiring wealth beyond his known sources of income and the transaction was the lynchpin of the allegations.
The First Information Report (FIR) of the case questioned the valuation of each share of BDNews24.com in the transaction.
It was shown to be Tk 12,500, but the face value of each share was Tk 100, with Tk 12,400 being the premium.
The valuation was incredulous and the first-of-its-kind in the country, the ACC said in the FIR.
Khalidi said BRAC-EPL had prepared the valuation, only for the brokerage firm to deny any involvement in the appraisal prepared for the said transaction.
The FIR mentions that 40,000 shares of bdnews24.com were shown sold to LR Global Chief Executive Officer Reaz Islam.
The matter came to a conclusion in November last year and now the BSEC is opening the can of worms again.
Despite several attempts, neither Islam nor Khalidi could be reached for comments.
Islam recently spoke with the higher officials of BSEC in this regard, Monowar Hossain, head of legal and compliance department of LR Global, told Dhaka Tribune.
LR Global is yet to get a letter from the BSEC in this regard, he added.
Meanwhile, last month, LR Managers, the New York-based investment firm that owns a 47.7 per cent stake in the local asset management firm, wrote to the BSEC expressing grievance about the conduct of Islam, who used to run Citigroup’s hedge funds that lost most of their value in 2008.
“We also understand that the BSEC holds strong views regarding Islam’s suitability and stewardship to operate in Bangladesh. I would like to inform the BSEC that we carry many complaints regarding Islam’s suitability as a partner,” said Gavin Wilson, a partner at LR Managers, in the letter to the BSEC chairman on February 22.
LR Managers has not received any information regarding the operations or financial status of LR Global, which is 52.3 per cent owned by Islam, for many years, the letter read.
However, LR Global denied these allegations terming them as self-serving, completely false and misleading.
LR Global began operations in Bangladesh in 2008.
The company launched its first mutual fund in 2010 and is currently managing six closed-end mutual funds -- DBH First Mutual Fund, Green Delta Mutual Fund, AIBL First Islamic Mutual Fund, MBL First Mutual Fund, LR Global Bangladesh Mutual Fund One and NCCBL Fund One -- amounting to about $172 million.
On October 29, 2019, investors holding 70.1 per cent units of Green Delta Mutual Fund and 72.8 per cent of DBH First Mutual Fund wrote to the Bangladesh General Insurance Company Ltd (BGIC), trustee of both the funds, to replace their asset manager.
Later on October 31, the trustee sought the BSEC approval in this regard. The BSEC gave the go-ahead and announced IDLC Asset Management as the asset manager.
LR Global tried to retain management of both the funds, taking the matter to the court and the Bangladesh Competition Commission. The matter is still pending in court.