Private equity, venture capital financing rules drafted

Mohammad Mufazzal The securities regulator has drafted private equity and venture capital financing rules, proposing creation of an 'Alternative Investment Fund' to facilitate funding arrangements for prospective private firms, officials said. The securities regulator took the initiative considering the prospects of many local firms having fund shortage. The officials of the Bangladesh Securities and Exchange Commission (BSEC) said after the commencement of the rules, the Alternative Investment Fund will make equity and quasi-equity investments in those prospective firms. According to the draft, the proposed investment fund will have to be operated by a fund manager under the Bangladesh Securities and Exchange Commission (Alternative Investment) Rules, 2015. The fund managers, which will have to be registered with the BSEC, will raise capital for a fund from the eligible investors who may be Bangladeshi, foreign and NRBs by issuing units of the fund. Under the Trust Act, 1882, the Trustee, registered with the securities regulator, will have to play a vital role in ensuring the interest of the unit holders. "Trustee shall act on behalf of exclusive interest of the unit holders," the draft said. Among other responsibilities, the Trustee will receive payments from eligible investors for subscription of units and deposit the money received by the fund in a scheduled bank account maintained entirely for the purpose of the fund. The BSEC officials said the proposed rules is likely to be approved by this month (June). "Some changes may occur in the draft of the rules. After taking public opinion, the rules will come into effect by June," said a BSEC official. As per the draft, the minimum size of the fund will be Tk 100 million and the initial subscription by the sponsors will not be less than 10 per cent of total size of the fund. At least 75 per cent of the fund shall be invested in non-listed securities as the main objective of forming such fund to promote private firms in their early stage. The fund manager will be allowed to invest maximum 25 per cent of the fund in listed securities and units of alternative funds managed by other fund managers. A fund shall be formed for a specific 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. mufazzal.fe@gmail.com
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