HC declares illegal SEC bar on AIMS’ bonus, rights

The High Court on Tuesday declared illegal the Securities and Exchange Commission’s decision not to approve the bonus and rights offers of the AIMS 1st Mutual Fund.
   The court also asked the SEC to approve the mutual fund’s proposal for declaring rights and bonus offers for investors within 10 days after receiving application from the fund’s trustees.
   The bench of Justice Mamnoon Rahman and Sayeda Afsar Jahan pronounced the verdict after the final hearing of the writ petition filed on March 25 by Md Abdul Hossain, a small investor in the capital market, challenging the SEC’s decision that rejected the AIMS 1st Mutual Fund’s proposal for declaring the rights and bonus as dividend.
   The SEC on March 7 rejected a proposal for 70 per cent stock dividends and 130 per cent rights issue for the years of 2007 and 2008 declared by the trustee body of the AIMS 1st Mutual Fund on February 23.
   The SEC, after the decision of the trustee board was announced, halted trading of the mutual fund on February 25. The trading of the AIMS was, however, resumed on July 4.
   Yawer Sayeed, top official of the asset management firm, AIMS of Bangladesh, told New Age that High Court’s verdict would benefit the investors. ‘We will follow the court’s decision,’ he said.
   After Abul Hossain filed the writ petition on March 25, the HC on the same day issued a rule on the SEC to show cause as to why its directive, declining to grant approval for distributing stock dividend and rights issue, should not be declared to have been taken without lawful authority. The court also stayed the operation of the SEC’s directive for three months.
   Officials of the Dhaka Stock Exchange said that the SEC first approved AIMS’ rights offer in 2005 although there was no precedent of issuing rights and stock bonuses by any close-end mutual fund in the world.
   But when AIMS declared stock dividend for 2007, the SEC rejected the application and amended the regulations for mutual funds, barring close-end mutual funds from issuing stock dividends and rights offers.
   After three investors filed a writ petition challenging the amendment, the HC gave a verdict that the mutual funds which were listed before June 2008 could issue stock dividends and rights offers by taking the SEC’s approval.
   All the mutual funds, except AIMS, however, declared cash dividends.

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HC verdict on AIMS 1st Mutual Fund case Oct 5

The High Court (HC) will deliver its verdict on the writ petition of AIMS First Mutual Fund on October 5 next, lawyers said.

On the other hand, the hearing on the SEC's (Securities and Exchange Commission) appeal against the HC's stay order on the regulator's directive in connection with margin loan formula is likely to take place Sunday next.

On the hearing of AIMs, Barrister Rokon Uddin Mahmud and Barrister Fazle Noor Taposh appeared for the petitioner. Senior Advocate Mahmudul Islam moved on behalf of the SEC.

After completion of hearing, the HC bench comprising Justice Mamnoon Rahman and Justice Syeda Afsar Jahan decided to deliver the verdict on October 5 next.

Earlier, a lawyer on behalf of the investors filed a writ petition challenging the securities regulator's rejection of rights offer announced by the trustee of the Fund.

The trustee of the mutual fund has announced 70 per cent stock dividend for 2007-08 and 2008-09 and a 130 per cent rights entitlement.

The hearing on the SEC's appeal in connection with margin loan formula did not take place as the newly appointed Chief Justice A B M Khairul Haque was busy in taking formal oath as the 19th chief justice of the Supreme Court.

Attorney General Mahbubey Alam has been entrusted with the responsibility to move on behalf of the SEC.

On Monday, two investors filed a writ petition challenging the SEC's directive on the NAV-based margin loan calculation and suspension of netting facilities for non-marginable securities.

Following the writ petition, an HC bench stayed the SEC's directive for a period of three months.

The HC bench also issued a rule upon the government and the SEC to explain within four weeks why they should not be directed to take steps to create an investment-friendly environment and help keep the stock market stable.

The rule also required the government and the regulator to explain why the SEC directive would not be declared illegal.

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