The Bangladesh Securities and Exchange Commission (BSEC) on Tuesday took action against individuals and entities involved in irregular investments in the loss-making company formerly known as Padma Printers and Color Limited, now renamed Quest BDC Limited, resulting in huge investor losses.

Presided over by BSEC Chairman Khondoker Rashed Maqsood, the 978th Commission meeting approved a series of punitive measures against former directors of Quest BDC Limited, LR Global Bangladesh Asset Management Company Limited and associated mutual funds for violations of securities laws, unethical collusion and mismanagement.

The decisions followed an investigation into the acquisition of 51 percent of the company’s shares by six mutual funds managed by LR Global Bangladesh Asset Management Company Limited — NCCBL Mutual Fund-1, LR Global Bangladesh Mutual Fund One, AIBL First Islamic Mutual Fund, MBL First Mutual Fund, DBH First Mutual Fund and Green Delta Mutual Fund.

The funds invested a total of Tk 68.64 crore in a company that had no ongoing business operations at the time, a negative net asset value (NAV) of Tk 2.74 per share, and retained losses of Tk 2.35 crore as of June 30, 2022.

The BSEC noted multiple violations, including failure to disclose price-sensitive information, not holding an Extraordinary General Meeting (EGM), and issuing shares through private placement without proper lock-in.

The company’s paid-up capital was also irregularly increased from Tk 1.60 crore to Tk 50 crore without prior shareholder approval.

As a result, BSEC imposed Tk 1 crore fines each on six former directors of Quest BDC Limited representing the mutual funds.

It also ordered the funds to recover the illegally invested money with interest within 30 days; failure to comply would result in additional fines of Tk 98 crore for LR Global Bangladesh CEO Reaz Islam, and Tk 1 crore each for directors George M. Stock III and Rezaur Rahman Sohag.

Besides, the commission initiated the process to terminate LR Global Bangladesh Asset Management Company Limited as the asset manager of the six mutual funds to protect unit-holders’ interests.

Bangladesh General Insurance Company Limited, serving as trustee of the funds, was fined Tk 3 crore for failing to oversee the investments.

BSEC also imposed fines on Quest BDC Limited’s former chairman Rezaur Rahman Sohag (Tk 10 lakh) and Brigadier General Sharif Ahsan (Rtd) (Tk 1 lakh) for conflicts of interest and providing false information.

Besides, the former BSEC chairman, Prof Shibli Rubaiyat-ul-Islam, and LR Global Bangladesh CEO Reaz Islam were permanently banned from participating in capital market activities due to unethical collusion in approving the irregular investments.

The commission also referred the case to the Anti-Corruption Commission (ACC) for alleged money laundering involving Tk 24.95 crore invested by Quest BDC Limited in Thyrocare Bangladesh Limited following a manipulated share valuation conducted in collusion with City Bank Capital Resources Limited.