BSEC seeks public opinion on alternative investment

norms
Tribune Report

The market regulator Bangladesh Securities and Exchange Commission (BSEC) has posted certain
proposals on its website to seek public opinion intended to make new rules on alternative investment
for financing non-listed firms.
Private equity, venture capital, impact or any other type of funds will be called alternative investment
fund. Such fund is a privately pooled investment vehicle which collects funds from eligible investors to
invest in accordance with a defined investment policy.
The proposals intended to regulate venture capital companies are relatively new in the country.
The venture capital companies usually provide fund for start-ups with high potentials.
According to the salient points of the proposed new rules titled Bangladesh Securities and Exchange
Commission (Alternative Investment) Rules, life or tenure of a fund will be 5-15 years.
However, the life of the fund may be extended for a period of up to two years subject to approval of at
least three-fourth majority of the unit holders.
An alternative investment fund size will be at least Tk10 crore and subscription by the sponsors will
not be less than 10% of the fund. Minimum investment by the fund manger must be at least 2% of the
fund.
Any person connected to the fund, sponsors, shareholders and the fund manager will not be allowed
more than 25% of the units of a fund at any point of time.
The sponsors will maintain a continuous investment of not less than 2.5% of the fund.
An alternative investment fund will be allowed only cash dividends to the unit holders. All investments
in a fund will be locked in for a period of three years from the date of issuance of units.
For the eligibility to apply for operating fund, the applicant will require to have a paid-up capital of at
least Tk5 crore, but for a fully-owned foreign entity or for a foreign fund management, applicants must
have their paid-up capital of at least Tk150 crore, and for a foreign entity or foreign fund management
subsidiary company, they must have Tk10 crore for paid-up capital.
Fund managers must have a minimum net worth of 75% of their paid-up capital, and in case, the networth of fund managers goes down below 75% of their paid-up capital, they must increase that to the
required level within the next accounting year.
The fund managers annual fee will be Tk50,000 to pay through a bank draft one month withing the
end of each financial year, and if failed to pay within the stipulated time, fund managers must be liable
to pay Tk25,000 for each month of default.

Fund managers may raise capital for a fund from eligible investors through issuance of units in
accordance with the rules and the minimum subscription to the units of a fund must be Tk50,00,000.
Only private placement, but no public offer will be allowed.
No alternative investment fund will be subscribed by more than 200 investors.
For investment criteria, a maximum 25% of the fund must be invested in listed securities and
investment in single listed securities will not exceed 5% of the fund.
No alternative investment fund can invest more than 25% of the fund to a single non-listed portfolio
company.
The proposed rules have been posted on the commissions website for getting opinion from public and
shareholders before finalising the new rules.
- See more at: http://www.dhakatribune.com/business/2015/dec/13/bsec-seeks-public-opinionalternative-investment-norms#sthash.yC1xTiDf.dpuf

The gazette on the rules of Alternative Investment is likely to be passed within two
days. We hope such rules will play an important role in creating funding facility for
prospective companies, Professor HelalUddinNizami, a BSEC commissioner, said.
According to the rules,

The funds will have to be managed professionally by the fund managers and
the trustees.

Both the trustees and fund managers will have to be registered with the
securities regulator.

Fund managers will raise capital for a fund by issuing units of the fund to
eligible investors who may be Bangladeshi, non-Bangladeshi, and NRBs

The minimum size of the fund will be BDT 100 million and the initial
subscription by the sponsors will not be less than 10% of total size of the fund.

At least 75% of the fund shall be invested in non-listed securities, as the main
objective of forming such funds is to promote private firms in their early
stages.

The fund manager will be allowed to invest maximum 25% of the fund in listed
securities and units of alternative funds managed by other fund managers.

An Alternative Investment fund shall be formed for a period of five to 15 years

and the tenure will be mentioned in the constitutive documents.

All investments in a fund shall be locked for a period of three years from the
date of the issuance of the units.

ShawkatHossain, managing director of BD Venture Limited, said banks are not

interested in financing small firms and that it would take some time for venture
financing to become popular in Bangladesh.
But across the world many renowned companies achieved their targets through
venture financing. I think the regulatory approval to the rules of Alternative
Investments is a good start, Mr. Shawkat said.