How RACE turns to legal tangles to stall enforcement, probe into irregularities

The Bangladesh Securities and Exchange Commission (BSEC) has moved to enforce an investigation report that recommended the revocation of RACE Asset Management's licence and permanently barring its Chairman Chowdhury Nafees Sharafat and Managing Director and CEO Hasan Taher Imam from the securities market.

The High Court issued a stay order in February 2025 after RACE filed a writ petition challenging the report of the commission's inquiry and investigation committee. The stay was vacated in May 2026 following an appeal by BSEC.

Abul Kalam, spokesperson for BSEC, told TBS, "Following the court's order, the commission's enforcement is continuing, and action will be taken accordingly. Show-cause notices have been issued to those named in the report, with some seeking additional time to respond."

The BSEC investigation committee, formed in September 2024, recommended revoking RACE's asset management licence and cancelling the registration of its 10 mutual funds, with the units to be redeemed under the supervision of their respective trustees. 

It also called for permanently barring Nafees and Taher from the securities market, including raising funds from capital and financial markets or managing investment fund schemes.

The recommendations followed findings of regulatory violations, corruption, and money laundering that allegedly caused substantial losses and exposed investors to serious risks.

The investigation report, a copy obtained by TBS, was submitted to BSEC in November 2024.

Infograph: TBS

However, BSEC could not implement the recommendations after RACE secured a High Court status quo order preventing the regulator from acting. BSEC subsequently won the case after contesting it for about 15 months, clearing the way for enforcement.

This is not the only legal dispute between BSEC and RACE. The regulator has been involved in six cases with the company over various issues, including the freezing of bank accounts and the formation of fresh inquiry committees.

In November 2025, BSEC formed six separate committees to reinvestigate corruption allegations against RACE. The company secured stay orders against the investigations, but BSEC later won the cases and proceeded with the probes.

Earlier, in August 2024, BSEC ordered the freezing of the beneficial owner (BO) accounts of Nafees Sharafat and Taher Imam. RACE secured a stay order against the move, and the case remains pending.

BSEC also fined RACE Tk55 lakh in April 2026 for failing to comply with regulatory requirements governing investments in listed and government treasury bonds.

Meanwhile, the Criminal Investigation Department has filed a money laundering case against Nafees, his wife Anjuman Ara Shahid and Taher over alleged laundering of Tk1,613 crore.

Multiple investigations find irregularities

Separate investigations by the CID, Investment Corporation of Bangladesh (ICB) and BSEC found evidence of Tk1,613 crore in money laundering, Tk345 crore in dubious and unrecoverable investments that violated regulations, and Tk180 crore in overstated net asset values (NAVs) involving four RACE-managed mutual funds.

Separate probes by government agencies also uncovered large-scale forgery and fraud, including dubious investments, inflated NAVs to generate higher fees and money laundering, causing substantial losses to the funds.

RACE directors have denied the findings and filed multiple cases challenging the investigations and delaying regulatory action. Nafees and his associate Taher have remained abroad since the ouster of the Sheikh Hasina government.

RACE obtained its licence in 2008 and later became the country's largest fund manager, managing 10 mutual funds and a special purpose vehicle (SPV) worth Tk3,500 crore.

Allegations of fund misuse and misstatements in financial reports subsequently prompted multiple investigations by the regulator and government agencies. Instead of cooperating, RACE filed numerous cases to stop the investigations and delay actions.

Legal battle with ICB after failing to submit financial statements

In November 2025, ICB, trustee of six RACE-managed mutual funds, suspended their bank account operations over regulatory violations, including failure to provide investment transaction details and submit audited and quarterly financial reports.

RACE challenged the move in court and secured a stay order. ICB contested the case and obtained a status quo order, later informing the relevant banks that its original instruction barring withdrawals from the accounts remained in effect.

According to letters ICB sent to the DSE and BSEC, auditor SK Barua could not complete the 2024-25 financial statements because of RACE's non-cooperation. The audit was due by 31 July 2025, but RACE repeatedly failed to provide the required documents.

RACE also failed to submit unaudited third-quarter financial statements for the six funds, covering 1 July 2024 to 31 March 2025. 

Under regulations, an asset manager must submit quarterly reports on each fund to the BSEC, trustee and custodian within 30 days of each quarter-end, with board approval.

At a 29 April 2025 meeting, a RACE official said the company's CEO was staying abroad. ICB instructed RACE to obtain his signature on the financial statements through the embassy and submit them, but the signed statements were never provided.

The CEO is one of the joint signatories required to operate the funds' bank accounts. His prolonged absence therefore raised concerns over fund withdrawals, while ICB said it had not been formally notified in writing of his stay abroad.

Regulations allow an asset manager's CEO to remain abroad for up to 90 days with board approval and after notifying the BSEC and, where applicable, the trustee and custodian. Staying abroad beyond 90 days requires prior BSEC approval.

Amid the reporting failures, RACE sold securities worth about Tk39 crore from the six funds on 2 October 2025, completing the sales within four working days.

ICB said the volume was questionable, as it was about 90 times higher than sales during the previous period from 1 January to 25 September 2025, spanning nine months and 25 days.

ICB observed that RACE's investment decisions had adversely affected the funds' financial performance and investors' interests, prompting the trustee to suspend bank account operations to strengthen governance and protect investors.

How RACE overstated NAV

An audit of the operations and financial reporting of four of the six mutual funds for which ICB is trustee found significant irregularities and misstatements, including overstated NAVs.

The audit covered investments in Regent Spinning Mills and Premier Bank corporate bonds, Padma Bank, Multi Securities and Services, a non-listed unit fund, and fixed deposits.

The audit found that RACE overstated the NAVs of the four funds by Tk180 crore between FY21 and FY23 by failing to adequately recognise impairment losses on investments.

Regent Spinning Mills' corporate bond had been classified as non-performing because of unpaid interest from July 2019. Despite this, RACE continued increasing the funds' exposure, investing an additional Tk27 crore in FY20 and raising the total to Tk59 crore by FY23.

The investments continued despite ICB warning that Regent Spinning would be declared a defaulter from 30 June 2020 if its outstanding interest remained unpaid.

RACE also failed to classify the bond as non-performing and recognised Tk1.2 crore in interest income in FY21, despite its maturity on 30 June 2020. The investment balance and accrued interest contributed to overstated NAVs, according to the report.

The auditor's requests to Regent Spinning to confirm the existence and ownership of the bond investments went unanswered.

The audit also found that principal encashment of Tk67 crore and accrued bond interest of Tk1.2 crore had been adjusted through entities including Multi Securities and Services Limited (MSSL), a special purpose vehicle and advance income tax, without bank receipts.

According to MSSL's audited financial statements for 30 June 2023, the four RACE-managed funds collectively owned 29.06% of the brokerage. The special audit report said all mutual funds managed by RACE together held 100% of MSSL.

A brokerage house is generally used by mutual funds for transactions in listed securities. However, between 1 July 2020 and 30 June 2023, the four funds also recorded transactions involving bank receipts and payments through MSSL.

The report said the transactions indicated RACE had significant influence over MSSL's operations and management, raising concerns about related-party conflicts, transparency in trade execution and the pricing of securities recorded in the funds' accounts.

Before the special audit, ICB's internal inspection had identified mismanagement involving six mutual funds that could result in investor losses exceeding Tk220 crore. It also found Tk345 crore invested in four projects in violation of the funds' trust deeds.

ICB said the investments had caused losses because principal and returns could not be recovered after bond maturities, while some shares had been purchased at inflated prices.

Following the findings, ICB appointed a special auditor to examine the funds. The audit corroborated the earlier findings and could not verify some investments, including those in Padma Bank, Premier Bank corporate bonds, MSSL, and others because of non-cooperation.

RACE denies allegations

Despite a regulatory fine, money laundering case and multiple investigations, RACE has continued to deny allegations of corruption and regulatory violations.

In a rejoinder to TBS on 11 July, RACE claimed all of its fund assets remained intact with custodians BRAC Bank and ICB, which it said had independently certified this at every quarter- and year-end.

However, ICB found evidence of fund mismanagement and suspended bank operations of six RACE-managed mutual funds after the company failed to submit its third-quarter FY25 report and cooperate with the auditor.

RACE described the regulatory actions as arbitrary and unjustified, alleging unfair treatment by former BSEC officials. The company said it remained operational under CEO Taher. 

ICB, however, said his prolonged absence abroad posed risks to fund withdrawals and that RACE had failed to submit financial statements on time.