BSEC imposes ban on asset management firm CEO, chairman

BANGLADESH: The Bangladesh Securities and Exchange Commission (BSEC) imposed a lifetime ban on Reaz Islam, CEO and chief investment officer of LR Global Bangladesh Asset Management and also its former chairman, Professor Shibli Rubayat-Ul-Islam, for allegedly aiding LR Global officials in carrying out the irregularities – related to the acquisition and restructuring of Padma Printers and Color, later renamed Quest BDC.

BSEC said LR Global-managed mutual funds illegally invested a total of BDT686.4 million (US$5.62 million) in the loss-making and dormant at an inflated price, then later flouted regulations with a private placement without due processes.

BSEC is further canceling LR Global's license as the asset manager of its six mutual funds and wrote to the Financial Reporting Council for necessary action against Shafiq Basak & Co, Chartered Accountants. Investigations will proceed into allegations of money laundering and corruption – involving transfers from Quest BDC to Thyrocare Bangladesh.

Hefty fines were imposed on Bangladesh General Insurance, trustee of the funds, for failing to safeguard investor interests, and Quest BDC former chairman Rezaur Rahman Sohag for providing false information.

The commission fined six former directors of Quest BDC – including Reaz Islam – for failing to comply with regulatory requirements. It also ordered LR Global to return BDT900 million (US$7.37 million), including interest, to the six affected mutual funds within 30 days. If the funds are not reimbursed within the deadline, Reaz Islam will be further fined, together with George M. Stock III and Rezaur Rahman Sohag.

LR Global Bangladesh Asset Management claims to be an affiliate of New York-based investment holding firm LRG, reportedly managing US$172 million AuM in six mutual funds, including the AIBL 1st Islamic Mutual Fund.