The insurance regulator has asked Sonali Life Insurance to explain why the board of directors of the company should not be suspended after failing to provide necessary information to an audit firm appointed by the regulator.

The Insurance Development and Regulatory Authority (IDRA) sought this explanation in letters sent to the company's chairman and a director on January 24.

A written explanation has to be given to IDRA by January 29. Otherwise, legal action will be taken, according to the letter.

It said the appointed audit firm, Hoda Vasi Chowdhury & Co, sent a letter to IDRA on January 23 saying that Sonali Life Insurance was withholding necessary information.

The audit firm is not being allowed to access the computer-based accounting system, nor has it received any original documents of the company, the letter said.

Withholding documents and information appears to be an attempt to obstruct the investigation, according to the letter.

This is creating a situation where the truth is being obscured, thereby harming the interests of insurers and policyholders, it added.

On December 31, IDRA appointed Hoda Vasi Chowdhury & Co to complete investigations into 17 claims of irregularities at Sonali Life within 30 days.

Then, on January 18, Mostafa Golam Quddus resigned as chairman of Sonali Life Insurance for the sake of a fair investigation.

The allegations included the chairperson not meeting the prerequisite of owning a minimum of 2 percent of the company's shares and the purchase of a Tk 1.7 crore luxury car for the chairperson alongside exorbitant expenses for its maintenance from 2021 to 2023.

Sonali Life also allegedly paid Tk 13.75 lakh in 2021 for taxes owed by Dragon Sweater and Spinning, a company with no connection to the insurer other than being owned by Quddus.

The audit will also look into the means and manner through which the Sonali Life's directors purchased its shares to boost its paid-up capital in 2018.

The company has also shown inflated figures in terms of its life funds, said an IDRA official on condition of anonymity.