The securities regulator, BSEC, has allowed closed-end mutual funds to give stock dividends to the unit holders as it amended the mutual fund rules. Presently, the funds only provide the unit holders with cash dividend payout.
From now on, the closed-end mutual funds are allowed to issue at least 70% of the profit as dividends and open-ended mutual funds can give not less than 50% of the profit as dividends, said Bangladesh Securities and Exchange Commission (BSEC) in a statement yesterday.
The watchdog communicated the decisions on its site through a press release at around 12 noon, during the trading hours, going beyond its tradition to make the commission decisions after the trading hours.
Stock dividend, popularly known as bonus dividend, is a payment made in the form of additional shares, rather than a cash payout.
In October last year, the regulator posted the proposed changes of Mutual Fund Rules 2001 on its website for public and lawyers’ opinion before a final approval. The statement said fund managers will have to keep unit holders of the open-end mutual funds informed about fund’s character and prospect.
“All fund managers will have to submit documents within seven days from the date of completion of dividend distribution to the commission, trustee and custodian. Stock or cash dividends are required to disburse among the unit holders within 45 days from the date of dividend declaration,” it said.
A mutual fund is a professionally managed collective investment scheme that pools money from many investors and invests them in stocks, bonds and short-term money market instruments. Presently, there are 43 listed closed-end mutual funds and around five open-end mutual funds are in operation.
The BSEC also approved the Research Analysis Rules 2013, allowing firms to provide analysis report on specific stocks to their respective clients in an effort to reduce investment risk for retail investors. Merchant banks, stockbrokers, stock dealers, asset management companies and independent research firms would be eligible to publish research reports on listed securities, according to the rules.
The institutions must have a separate research team comprising at least three members, including a head of research, it said.
Any person seeking to become a research analyst must have relevant academic or professional qualification with at least three years of experience in the stock market, while the head of research team must have five years of experience, the rules said.
The research staff must exercise diligence, independence and thoroughness in analysing securities and making investment recommendations. They must have reasonable and adequate basis supported by appropriate research and investigation, for any investment analysis, recommendation or action.
It said the advisory service should be research based and the service provider must have a research wing which would be formed according to the research analysis rule and the analysts had to ensure that they did not hold any position in a stock at the time of publishing the analysis report.
The research analysts would not be able to participate with merchant bankers and investment bankers in generating investment banking business, it said. In March, 2012, the BSEC had proposed the rules and sought opinion from the public by posting on its website.
