BSEC issues new mutual fund rules 2025, ends approval of term funds

Business Report :

The Bangladesh Securities and Exchange Commission (BSEC) has published the “Mutual Fund Rules, 2025”, officially ending the approval process for new term (closed-end) mutual funds in the country.

The rules were issued through an additional gazette on Wednesday and took effect immediately after publication, according to a BSEC notification released on Thursday.

Under the new regulations, BSEC will no longer approve any new term-based mutual fund schemes.

Only open-ended funds will be allowed going forward, although special provisions have been made for existing term funds to manage their ongoing operations.

The rules include a new safeguard for investors. If the average market price per unit of a mutual fund drops by more than 25 percent compared to its purchase price or declared net asset value (NAV) within six months of the rules’ publication, the fund’s trustee may call a special general meeting (EGM).

At this meeting, unitholders can vote by a three-fourths majority to either convert the fund into an open-ended scheme or terminate it, with BSEC approval required for the final decision.

The new guidelines also outline where mutual fund money can be invested. Funds may invest only in securities listed on the main board of the stock exchanges, initial public offerings (IPOs), republic offerings (RPOs), and right shares, and government securities such as treasury bonds and bills.

Apart from this, investment in certain areas has been restricted or banned. Mutual funds cannot invest in delisted securities, securities on the Alternative Trading Board (ATB) or SME platform, bonds rated below ‘A’ debt instruments, or Islamic Shariah-based securities.

Additionally, if a fund has already invested in a company whose shares are later delisted from the main board or moved to the ATB/SME board, that investment must be withdrawn within six months.

Officials said the new rules are designed to make the mutual fund industry more transparent, secure, and aligned with international standards.

By allowing only open-ended funds, the BSEC aims to ensure better liquidity and protect small investors from market manipulation often associated with term funds.

The Mutual Fund Rules, 2025 replace the Mutual Fund Rules, 2001, marking a major regulatory update for Bangladesh’s capital market.