The Bangladesh Securities and Exchange Commission has fined asset management company Bangladesh RACE Management PCL Tk55 lakh for failing to comply with regulatory requirements on investments in listed bonds and government treasury bonds.
The penalty follows findings of irregularities in 11 out of the 12 mutual funds managed by the company, with Tk5 lakh imposed on each non-compliant fund, according to a recent order issued by the BSEC and published on its website.
The regulator also directed the firm to deposit the fine within 30 days of the order, warning that failure to do so would trigger further action under securities laws.
The commission, in its order, noted that the penalty was imposed mainly for failing to invest at least 3% of fund portfolios in listed debt securities and at least 1% in government treasury bonds, as required by regulations.
According to the order, “as per the Commission’s directive dated 23 May 2021, a mutual fund shall invest at least 3% of its portfolio value in listed debt securities within 30 June 2022 and shall at all times maintain such investment ratio in the listed debt securities.”
The deadline was later extended to 30 June 2023. However, the commission found that, as of 30 June 2025, 11 of the 12 funds under RACE had less than the required 3% exposure to listed debt securities.
In a separate directive issued on 19 February 2023, the regulator mandated that market intermediaries – including asset managers, merchant bankers, portfolio managers, stock dealers and mutual funds – must invest at least 1% of their own portfolios in listed treasury bonds by 30 June 2023 to diversify risk.
The commission found that funds managed by RACE had no investment in listed treasury bonds as of 30 June 2025.
Trustees flagged repeated non-compliance
The Investment Corporation of Bangladesh, trustee of six mutual funds, repeatedly instructed RACE during trustee committee meetings in the 2024-25 financial year to comply with the 3% investment requirement in listed debt securities.
Similarly, Bangladesh General Insurance Company Limited, trustee of four other funds, flagged the issue as non-compliance on several occasions.
The regulator noted that RACE did not act on these instructions.
It is also worth noting that, following observations from the ICB, the Commission sent a letter to RACE on 28 May 2025, seeking an explanation on the matter.
As all the funds had similar observations, the Commission’s relevant department issued the letter only in the name of “Exim Bank First Mutual Fund”. However, RACE has yet to respond to the Commission’s letter.
RACE disputes findings
In a statement issued today (6 April) on the enforcement action, RACE said it had never made any investment in Agni Systems, for which the penalties were imposed.
It added that RACE-managed funds had neither invested in nor traded shares of the company, terming the BSEC order illegal and saying it had immediately informed the regulator.
RACE also addressed the requirement to invest 3% in listed debt securities and 1% in listed treasury bonds, stating that during the relevant period its mutual funds were subject to trading restrictions, bank account freezes, and BO account suspensions, creating what it described as an “impossibility of performance”.
It said, as a result, the funds were unable to execute trades, settle transactions, or rebalance portfolios, and therefore could not comply with the investment requirements.
“During this period, the Funds, being incapacitated from executing any trades, settling transactions, or undertaking portfolio rebalancing, were unable to maintain the newly introduced requirement of investing 3% in listed debt securities and 1% in listed treasury bonds,” the company said in the statement.
“Accordingly, the alleged non-compliance, if any, concerning investment in debt securities and treasury bonds arises solely from regulatory actions, and not from any negligence or failure on the part of RACE or the mutual funds,” it added.
The company further alleged that the regulator had repeatedly targeted RACE by imposing operational suspensions that led to such constraints.
RACE said, “It further appears from the record that BSEC has continuously been targeting RACE and imposing suspensions on its operations, which in turn created an ‘impossibility of performance’ situation. Thereafter, BSEC’s highlighting of such non-performance and imposing penalties as justification for alleged violations of securities laws is tainted with malafide and shares arbitrariness on the part of the regulator.”
At an earlier hearing on the matter, before the fines were imposed, RACE highlighted similar points to defend its position.
The company said certain measures – including restrictions and directives – had harmed both the company and the funds it manages. “We have found instances where the restrictive actions are not taken directly by BSEC, but rather BSEC instructs trustee/custodian to take the restrictive action,” the company said.
RACE further argued that such continual actions were “against fundamental principles of equity and constitutional fairness in Bangladesh” and detrimental to unitholders. “These unlawful and restrictive actions, arbitrarily imposed, are exacting a heavy price on the wellbeing of the funds, especially eroding their asset value.”
The company added that restrictions under trust deeds, particularly sectoral exposure limits, had affected its ability to comply with the investment requirements.
“The Trust Deed as approved by BSEC restriction had a direct and material impact on the ability to comply with the 3% listed debt and treasury bond securities requirement,” it said, noting that most such securities in Bangladesh are issued by banks.
“As long as sectoral exposure remained above the 25% limit, the trust deeds prevented the funds from purchasing many of the listed debt and treasury bond securities that would have counted toward satisfying the Commission’s requirement.”
RACE noted it could only move towards compliance by first reducing bank-sector holdings and rebalancing portfolios within the allowed timeframe.
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