COMPARATIVE ANALYSIS OF MUTUAL FUND REGULATION BETWEEN

BANGLADESH AND PAKISTAN

1. Definition of Mutual Fund:

• In Bangladesh Mutual Fund Regulation, mutual fund means a fund established in the
form of a trust to raise monies through the sale of units to the public under one or more
schemes for investing securities including money market instruments.

• In Pakistan Mutual Fund is referred to as Investment Company and Investment Advisers.

2. Title Difference:

• These rules may be called Securities and Exchange Commission (Mutual Fund)
Regulation, 2009.

• These rules may be called the Investment Companies and Investment Advisers rules
1971.

Comments:

In Pakistan Mutual Fund Rules is called as Investment Companies and Investment Advisers rules
to perform the business for investing securities.

3. Commencement:

• In Bangladesh Mutual the Rules has commenced since 2001.

• In Pakistan these rules has commenced since 1971.

4. Authority Difference:

• In Bangladesh Authority means the body corporate who controls the Mutual Fund
regulation and the authority is the Securities and Exchange Commission.

• In Pakistan Authority means the Corporate Law Authority.

5. Annual Fee:

Topics Bangladesh Pakistan

1.Amount of Fee 1% of fund or $714 whichever is higher No written direction in the law
2. Mode of Pay order/ Bank draft No written direction in the law
Payment
3. Amount of Amount equal to half the amount of No written direction in the law
Penalty for Delay annual fee shall have to be deposited to
or Failure to pay the commission for delay of each month
or part of month.
4. Depositor of The head of Asset Management No written direction in the law
Penalty Company
5.Adoption of New In case failure to pay fee, no new No written direction in the law
Scheme scheme cannot be adopted unless the
outstanding amount is paid.
6.Grace Period to 8 days from commencing of financial No written direction in the law
pay year if the reason of delay in submission
of fees satisfactory.

6. Eligibility for Registration:

Title Bangladesh Pakistan

1.Formation Formed as trust under trust act 1882 and Registered as a public limited
the trust document registered under company under the companies
registration act 1908 ordinance 1984
2.Parties Sponsor, trustee, asset management Investment advisor, trustee,
company and custodian asset management company
and custodian
3. Criminal There is no written direction of such No director, officer or
Offence occurrence employee has not been
convicted of fraud or breach of
trust
4.Insolvent There is no written direction of such No director, officer or
occurrence employee has not been
adjudicated as insolvent or
has not suspended payment or
has not compounded with
creditors
5. Collectible Sponsor must pay at least 10% of No written direction in the law
Money collectible money of a close end scheme
and at least 10% of primary collectible
money of an open end scheme
6. Preservation of Sponsor shall preserve at least 1/10th of No written direction in the law
Fund 10% fund for full duration of a close end
scheme and at least for 3 years for open
end scheme
7. Registration of Each party shall register by the Each party shall register by the
each involved commission to perform as a party of commission to perform as a
parties mutual fund party of mutual fund
8. Capital to No written direction in the law Each closed-end company
function shall have a capital of
$1162791

7. Process of Application for Registration and Application Fee:

Topic Bangladesh Pakistan
1. Application fee $ 143 $ 291
2.Time for Commission will give decision about No written direction in the law
Consideration acceptance of application within 30
days of receipt
3. Rejection of Commission will give decision about No written direction in the law
application rejection of application in writing
within 15 days of receipt
4. Registration fee .20% of the fund No written direction in the law

5. Mode of payment Pay-order or bank draft No written direction in the law

8. Investment Policy and Diversification:

Topics Bangladesh Pakistan

1. Investment Fund can only be invested in Securities
areas listed in the stock exchange, IPO,
transferrable securities in the money
market and pre IPO placement of a primary
security issuer company
2. Minimum At least 70% of fund Shall have to be
investment deposited in Money Market Securities and
criteria out of which at least 50% fund in the listed
securities of stock exchange
3. Limit of Not indicated the law
Investment
4. Prior The commission and stock exchange shall
notification have to be informed by the asset
management company in writing stating
the amount of investment and duration at
least 7 days ahead of investment
5. Audit Value of investment will be audited by the
asset management company and trustee on
quarterly basis and the auditors in the
annual report
Shall enter into any transaction
in any security which is listed in
a stock exchange
May invest in unlisted securities
up to 10% in government
securities and rated up to 10%
of its total investment portfolio
The amount of investment shall
not exceed 10% of paid up
capital or 10% of issued capital
The investment policy shall be
clearly and concisely stated
memorandum and articles of
association and public offer for
sale of its securities
Not mentioned in law

09. Sale of Securities and Cost:

Topics Bangladesh Pakistan

1. Selling The difference between the selling Securities shall be offered to the
price price and repurchasing price of units public at per
of any scheme does not exceed 5% of
 selling price
2. Mode of No written direction in the law Shall not sell any securities foe any
price consideration other than cash.
3. Publication Disclose the sales price and Not available
of news repurchase price and the news of daily
about transactions in the website of asset
transaction management company and in the form
of press release at least one national
daily
4. Expense of There is no direct direction about The incorporation expense, the offer
Selling expense of selling in the law. for sale of securities, the distribution
of securities and commission
payable to underwriters shall be
borne by the investment advisor and
shall be reimbursable in equal
amounts paid annually over a period
of not less than 5 years

10. Prohibition:

Topics Bangladesh Pakistan

1. Restriction Fund cannot be invested in the
on investment transaction of option trading, short
selling or carry forward
2. Employment No staff or executive employed in the
Restriction management of a mutual fund shall be
at the same time the Merchant banker
or Portfolio Manager, Staff or
Executive of stock dealer or stock
broker.
3. Acts not
allowed
Funds cannot be invested to make a
loan or advances, short sale of
security, carry forward, purchase
security on margin, purchase real
estate, commodities or commodities
contracts or participate in a joint
account with others, acquire security
of another investment company.
Investment company cannot be
employed as a Broker, directly or
indirectly, any director, officer or
employee of the investment
company or its investment adviser
or any director, officer or employee.
Cannot merge, acquire or takeover
other investment company or pledge
any securities held or owned by it.

11. Appointment of Investment Advisers:

In Pakistan there is a provision to appoint a investment adviser as a party of mutual fund but
there is no such a provision to appoint a investment adviser as a party of mutual fund in
Bangladesh. The appointment process and role of investment adviser in Pakistan is following:
• Investment adviser shall be appointed by a writing contract.
• Contract shall not be valid for a period of not exceeding 10 years.
 • If the contract is terminated within first 5 years, then ¼ of annual average remuneration
of unexpired period shall be paid as compensation.
• The contract shall bear all expenditure of secretariat and office space, professional
management, including all administrative, accounting and legal services, fee payable to
auditors, custodian, tax on income, brokerage, stamp duty of the company
• Remuneration payable not exceeding 3% of net asset of the company for the first 5 years

12. Amount Distributable to Shareholders:

Topics Bangladesh Pakistan

1. Distribution Not less than 80% of annual profit as Not less than 90% of income
of profit among the unit owners of scheme derived from interest, dividend
profit/divid receipts and capital gain from the
end acquisition and disposal of
securities as dividend among
shareholders

13. Asset Management Company:

Eligibility for registration as an asset management company in both the country is same. There
exists same restriction about its Directors, officers or employees. But in Bangladesh there is
specific direction that no asset management company itself or any of its directors is the
entrepreneur of any mutual fund or director of any Trustee or Custodian, Stock Dealer, Stock
Broker, Merchant Banker, portfolio manager or director of any other organization.

Pakistan Bangladesh
Paid up capital $3,50,250.00 $2,12,842.00
Net worth ------------- $1,77,368.33
Application fee $141.89
Registration fee $583.75 (including application fee) $709.47
Mode of Payment Bank draft Pay order/ Bank draft
Paper Submitted to the
Application form, bank draft(fee) Application fee, bank draft
commission (fee), Memorandum and
Articles of Association.
Annual fee -------------- $141.89
Remuneration paid to 1st 5 years: 3% of net asset of the ----------------
the Commission schemes & thereafter 2% of such
asset.

Minimum paid up capital of an asset management company of Pakistan is higher than

Bangladesh. But the registration cost is higher in Bangladesh. In Pakistan there is no requirement
for minimum net worth of an asset management company but mentioned in Bangladesh.
Bangladesh also mentions about annual fee but not give any direction about the remuneration
paid to the asset management company. Like Bangladesh Pakistan impose same duties and
responsibilities or the obligation to the asset management company.
14. Trustee:
In case of trustee both the country has same restriction that trustee shall not in any way related to
the asset management company. And in Pakistan trustee shall be entitled to such fee or
remuneration as allowed by the management company. But in case of Bangladesh application fee
of trustee is $70.89, registration fee is $212.84 and annual fee is $70.89. And in case of failure to
deposit the annual fee within the side time, an amount equal to the half of the annual fee is paid
as penalty. There is no difference in case of obligation of trustee and retirement of trustee.

15. Scheme of Mutual fund:

In both country system of announcing scheme is same that is no schemes shall be offered to the
public unless the same is authorized by the authority. Both the country needs approval in case of
advertisement about any schemes. Minimum collectable fund is specified in Bangladesh mutual
fund regulation but not in Pakistan. And Pakistan specifies what would be offer and redemption
price. This is helpful for their mutual fund market.

16. Custody of Securities:

Both the country appoints a custodian for holding and maintaining the securities owned or held
by the company or the mutual fund. Qualification of registration as a custodian

Topics Bangladesh Pakistan

1. Paid up US$ 142,857 Not mentioned in law
capital
2. Net worth US$ 8,571 Not mentioned in law
3. Financial Cannot be a bank defaulter Not mentioned in law
Solvency
4. Reputation Good reputation of honesty in Not mentioned in law
transaction
5. Involvement Cannot be entrepreneur, asset Not mentioned in law
management company, stock
dealer/broker, merchant banker,
portfolio manager or director of any
company
6. Experience as At least 5 years of experience as Chief Not mentioned in law
CEO Executive
7. Infrastructure The place for business service and an Not mentioned in law
essential equipments

17. Maintenance of Books of Accounts and other Documents:

Topics Bangladesh Pakistan

1.Types of Books Not mentioned in law • Journals, cash book and other records of
of Account and original entry
Documents to be • Ledgers reflecting asset, liability, income
Maintained and expense.
 • Ledger of securities which are receivable
or deliverable.
• Record of transaction with the bank
• Register of transaction of securities.

17. Disclosure of Periodical Report:

Topics Bangladesh Pakistan

1.Submitting Have to submit to the commission Have to submit annual report
Annual annual report including the investment including the following information
Reports to the and deposit of total scheme wise to the authority:
Commission portfolio of mutual fund. • Total number of security
with Contents holders
• Persons of holding 5% or
more of securities
• Name and numbers of
securities held by directors
officers
• Particulars of the personnel
• Remuneration paid to
investment adviser
• Fee paid to auditors
•
2.Timeframe Within 90 days of completion of each
for financial year
Submission