Interim order by SEBI on irregularities in Brightcom’s preferential allotments

SEBI had received complaints dated October 6, 2022 and May 12, 2023 in respect of the preferential allotments made by Brightcom Group (BGL) during FY 20 and FY 21. Such issues totalled Rs 867.78 cr. Complaints were related to –

  • Related party allotments;
  • Siphoning off of the money raised; and
  • Improper disclosures on utilisation of the raised money

SEBI then decided to conduct a detailed investigation into the matter and has now issued an interim order. Key findings in the order (for details refer the source link below).

  • BGL, CMD (Mr Suresh Reddy) and CFO (Mr Narayan Raju) were involved in round tripping of BGL’s own funds to falsely portray them as being received from the preferential allottees;
  • There was significant under receipt of the funds that should have been contractually received through the preferential allotment;
  • BGL , CMD and CFO siphoned off the received funds to themselves and the related entities;
  • They submitted forged and fabricated banks statements to the SEBI;
  • Promoters circumvented the lock in norms applicable to the promoters;
  • There were many significant disclosure lapses;
  • SEBI’s earlier forensic audit on the Company also found that BGL attempted to camouflage accounting entries in excess of Rs 1,280 cr during FY 19 and FY 20 to give a distorted view of the Company’s financial position.

Noting all the above SEBI found it imperative to investigate the matter further thoroughly. Hence issued only an interim order directing the following –

  • CMD and CFO shall cease to hold the position of Director or Key Managerial Personnel (KMP) of any listed Company or it’s subsidiaries until further orders;
  • BGL to place the order before its Board within 7 days;
  • CMD restrained from dealing in securities;
  • CFO and others noticees prohibited from selling BGL’s shares

It’s amazing to what extent some Companies can go in manipulating the stocks. The involved numbers are not small by any stretch of imagination.

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