Details : The Daily Star
The High Court (HC) yesterday handed down a verdict allowing closed-end mutual funds to issue bonus shares or rights issues. The same day, the HC halted the operation of the verdict for a week after the Securities and Exchange Commission (SEC), the market regulator, sought more time to appeal against the verdict.
In line with the verdict, the mutual funds will have to seek permission for bonus shares from the SEC, which market analysts say is a usual procedure. The verdict will be applicable to the mutual funds that had come to the market before the SEC brought some changes to the mutual fund rules.
The mutual fund operators now will be able to announce dividends that have been pending for long.An HC bench comprising Justice Syed Mahmood Hossain and Justice Quamrul Islam Siddiqui passed the verdict following a writ petition challenging the modifications of mutual fund rules by the SEC.
Three investors -- Ibrahim Akand, Delwar Hossain and Raihana Haque -- filed the writ petition. In response to the petition, the HC in August last year stayed the stock market regulator's ban on the issuance of bonus shares or rights issues for closed-end mutual funds.
The HC also stayed the dividend declarations by all mutual fund managers until disposal of the case.In July last year, the SEC approved changes in mutual fund rules barring closed-end mutual funds from offering bonus shares as dividends or right issues to increase their capital base.
A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocks, bonds, and short-term money market instruments.
Dr M Zahir appeared for the writ petitioners, while Advocate Mahmudul Islam defended the SEC in court.