BSEC fines Bangladesh Race Management Tk5 lakh for securities rules violation

According to the order, the commission found the allegations against Bangladesh Race Management to be established and said the company’s conduct was contrary to the interests of capital market development.

The Bangladesh Securities and Exchange Commission (BSEC) has fined Bangladesh Race Management PCL Tk5 lakh for violating a provision of the securities rules concerning the financial reporting of mutual funds under its management.

The commission imposed the penalty after rejecting an explanation submitted by the country’s largest asset manager regarding alleged non-compliance with the BSEC (Mutual Fund) Rules, 2001, according to a BSEC order issued on Sunday.

According to the order, the commission found the allegations against Bangladesh Race Management to be established and said the company’s conduct was contrary to the interests of capital market development.

The regulator said the failure to comply with securities laws and regulations warranted punitive action to uphold market discipline, transparency and the public interest.

The company has been directed to pay the Tk5 lakh fine within 30 days of the order through a bank draft or pay order issued in favour of the BSEC. Failure to pay within the stipulated period could lead to further legal action under securities laws.

The enforcement action followed a show-cause notice issued to Bangladesh Race Management concerning the applicability of Rule 33 of the Mutual Fund Rules, 2001. In its response to the regulator, the asset management company argued that the rule did not require submission of the audited financial statements of the asset management company itself.

RACE said it had consistently complied with the rule by submitting the audited financial statements of the mutual funds under its management. The company cited records showing submission of 57 audited financial statements relating to its mutual funds over the last five financial years.

The asset manager manages a number of closed-end mutual funds, including EBL First Mutual Fund, Trust Bank First Mutual Fund, IFIC Bank First Mutual Fund, First Janata Bank Mutual Fund, EXIM Bank First Mutual Fund, Popular Life First Mutual Fund, PHP First Mutual Fund, EBL NRB Mutual Fund and AB Bank 1st Mutual Fund. It also manages the open-end RACE Financial Inclusion Unit Fund.

RACE further argued that it had previously appeared before the commission over the same issue and submitted a detailed written explanation. The company said the earlier proceedings were disposed of by the BSEC in July 2026, but the subsequent show-cause notice was issued without taking into account the previous proceedings and its explanations.

The company also raised concerns about its capital adequacy requirements. According to its submission, RACE falls under Category 3, or asset managers, under the Risk Based Capital Adequacy Rules, 2019. It argued that, unlike stockbrokers and merchant bankers, an asset manager’s assets under management are kept off the balance sheet.

RACE said its Capital Adequacy Ratio stood at 443.26% in March 2026 and rose to 455.65% in June 2026, which it cited as evidence that its capital remained well above the minimum regulatory requirement.

The company also referred to a meeting in November 2023 attended by BSEC officials, RACE’s chief executive and executives of other asset management companies. RACE said it was understood at the meeting that Rule 33 applied to mutual funds’ financial statements rather than those of asset management companies. A task force was subsequently formed to establish reporting requirements, it added. Despite these arguments, the BSEC rejected RACE’s explanation and determined that the company had violated the mutual fund rules.

Source: The Business Standard