The Financial Express Reports: to facilitate funding arrangement for prospective private firms the securities regulator has drafted private equity and venture capital financing rules, with a proposal of creating an 'Alternative Investment Fund' to work further.
The report claims, 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.
The draft says, 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 will raise capital for a fund from the eligible investors who may be Bangladeshi, foreign and NRBs by issuing units of the fund.
The Trustee, registered with the securities regulator, will have to play a vital role in ensuring the interest of the unit holders under the Trust Act, 1882. 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 are likely to be approved by this month (June).
Minimum size of the fund will be BDT 100 million and the initial subscription by the sponsors can’t less than 10 per cent of total size of the fund.
The report says, since the purpose of forming such fund is to facilitate early stage private firms, investment primarily should be focused in early stage private investments. The draft says, at least 75 per cent of the fund shall be invested in non-listed securities and early stage private firms. No more than 25% of the fund will be allowed to invest fund in listed securities and units of alternative funds managed by other fund managers.
The draft also says, the tenure for a fund shall be for five to 15 years and the tenure has to be mentioned in the constitutive documents. Investment is a fund has to be locked for a specific period of three years.
There is an apparent need for private equity investment given the fact that startups ecosystem in Bangladesh is growing rapidly. However, until now nobody knows how private equity investment should work since there is not guideline or regulation. Furthermore, there is no regulation for VCs too. This draft is a critical addition to the ecosystem and a very good move. We’ll keep keen eyes on updates on the draft and bring it to your attention.
Source: The Financial Express