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SEBI bars Brightcom Group Chairman, CFO from company boards

The Securities and Exchange Board of India has barred Brightcom Group Ltd.’s Chairman and Chief Executive Officer Suresh Kumar Reddy and its Chief Financial Officer Narayan Raju from company boards for fraud and allegedly misrepresenting the financial statements of the company.

They are also barred from disposing of the shares of the company until further notice, according to an interim order on Tuesday. SEBI has also restrained investor Shankar Sharma and 21 other entities from disposing of shares in Brightcom Group.

This is the third SEBI order in the case of Brightcom Group. Earlier, SEBI had barred directors of Brightcom Group, including Reddy, for fraud involving manipulation of the company’s financial statements. SEBI had also penalized the company as well as Reddy for flouting insider trading rules.

According to the regulator, these executives were involved in the round-tripping of funds receivable by the company through preferential allotment of shares. The regulator conducted an investigation before issuing the order.

According to the regulator, Brightcom Group, between FY21 and FY22, raised Rs 867.8 crore by issuing warrants and shares on a preferential basis. From shares issued to 22 shareholders, the company only received Rs 52.51 crore against Rs 245.2 crore receivable. The funds were either not received by the company or were routed back to the shareholders through multiple conduit entities, SEBI has alleged.

The company further tried to cover up by forging bank statements. By circumventing its own funds for the issue of preferential shares and covering it up, Brightcom Group has violated several provisions of the Companies Act, provisions of the SEBI (Issue of Capital and Disclosure Requirement) Regulations, and the SEBI( Prohibition of Fraudulent and Unfair Trade Practices) Regulations. Bloomberg

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