Dhaka, Bangladesh — A probe and investigation committee formed by the Bangladesh Securities and Exchange Commission (BSEC) has found evidence of irregularities, corruption, and legal violations in the operations of Quest BDC, a company listed on the Over-the-Counter (OTC) market.
The committee has recommended a lifetime ban from capital market activities for both the company’s director and chief investment officer of LR Global Bangladesh, Riaz Islam, and former BSEC Chairman Professor Shibli Rubaiyat-ul-Islam. Additionally, the committee has recommended the cancellation of LR Global Bangladesh Limited’s registration and referral of the matter to the Anti-Corruption Commission (ACC) for further investigation.
Investigation Uncovers Widespread Misconduct
According to the investigation report, the board of directors of Quest BDC was found to have purchased shares at inflated prices, appointed officials from six mutual funds as directors, conducted unauthorized business, misused funds, and violated securities laws, all to the detriment of investors. The company also faced allegations of bribery, corruption, and money laundering, which were reportedly substantiated by the findings.
The investigation committee stated that in September 2021, the then-chairman of the regulatory body, Professor Shibli Rubaiyat, and Riaz Islam colluded to use funds from six of LR Global’s mutual funds to purchase a 51% stake in Padma Printers. The report alleges that shares from the sponsor-directors were bought at an inflated price and six officials were appointed as directors. It further accuses Professor Shibli Rubaiyat of abusing his power and coercing the original sponsor shareholders to sell their shares.
The report also claims that mutual funds managed by LR Global were misused by investing in unlisted companies and securities, which exacerbated capital losses. This is cited as a primary reason for the recommendation to impose a lifetime ban on both Riaz Islam and Professor Shibli Rubaiyat and to refer the case to the ACC for a detailed investigation into the proven irregularities and money laundering.
Unauthorized Capital Increase and Penalties
The report also highlights unauthorized appointments of directors, illegal capital increases, and improper withdrawal of investments. On July 17, 2023, the Quest BDC board reportedly increased its capital from BDT 1.60 crore to BDT 50 crore without holding an Extraordinary General Meeting (EGM). The committee has recommended filing criminal charges against all board members present at that meeting. It also suggested that the company be instructed to sell its investment in Thyrocare Bangladesh Limited and repurchase the shares at their original transaction price.
The committee has warned that the funds under LR Global’s management are being misused through suspicious investments in unlisted companies and securities, which could lead to further capital erosion. It has recommended a fine of at least BDT 1 crore for the company’s directors, officials, and advisors. The report further points out that the company provided software development and digital marketing services until June 2023, which was completely illegal as it lacked High Court approval. It also recommended a BDT 25 lakh fine for Rezaur Rahman Sohag, who allegedly forged board meeting minutes on December 1, 2024, to claim approval of his resignation.
Accountability and Future Actions
The investigation committee has recommended strict penalties for BSEC officials whose irresponsibility led to the approval of Quest BDC. It has also suggested the liquidation of the mutual funds and a refund of money to unit-holders to protect their interests. The auditor, Shafiq Basak & Co., has been recommended to be banned from auditing listed companies for three years and fined at least BDT 10 lakh for failing to exercise due diligence and professionalism. Similarly, City Bank Capital Resources Limited, which was responsible for the valuation, has also been recommended for a severe penalty.
The committee has advised that Bangladesh General Insurance Company Limited be instructed to take full control of the six mutual funds through a forensic audit to determine their current financial status.
BSEC Director and spokesperson, Abul Kalam, stated, “Some measures have already been taken in line with the investigation committee’s report. We will observe the remaining issues and take necessary steps soon.”
