Sub: Suspension of companies as a Surveillance measure - update
This is in continuation of the Exchange notice no. 20151218-28 dated December 18, 2015 and 20160115-8 dated January 15, 2016, inter alia, informing about suspension of companies as a surveillance measure.
Trading Members are aware that, in past, SEBI had passed several orders against the concerned parties/companies, inter alia, in relation to unusual price movements vis-a-vis preferential issue price and weak financials of the company. In addition to aforesaid, Trading Members are also aware that the Exchange had suspended trading in the securities of various companies on account of surveillance reasons.
It is noticed that there has been substantial increase in manipulation/abrupt movement in the prices of securities wherein common modus operandi is through the route of preferential allotment.
While the Exchange, from time to time, has taken requisite steps to detect and contain such instances, it is felt necessary that further pre-emptive measures should be adopted to curtail misuse of the Exchange’s system.
Accordingly, as informed earlier various enhanced surveillance measures such as reduction in price band, suspension in the trading of securities, etc., shall be adopted by the Exchange.
On this background Trading members are hereby informed that following process shall be followed for suspension and revocation of such companies:
a) Pursuant to the provisions of Rules, Bye-laws and Regulations of the Exchange (Bye-law 21), trading in the securities of the companies satisfying the parameters of the Exchange shall be suspended till such time the company submits the auditor certificate confirming compliance with regards to the preferential issue(s) made by the companies.
i) Amount raised under each of the preferential issue
ii) What was the object of raising the fund
iii) How the preferential issue benefitted the company
iv) There is no mis-utilization of funds raised under preferential basis. To be duly supported by bank statement of the company.
v) Money raised as above has not been transferred back to the preferential allottees/ promoters/ directors directly or indirectly
b) Auditor certificate needs to be duly supported by all the relevant documents relied upon along with the adequate cross references.
c) Exchange shall carry out initial verification based on the below mentioned documents to check completeness of the submissions made by the company and deficiency, if any, shall be informed to the concerned companies.
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Sr. No.
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Particulars
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1.
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Resolution passed by the Board of Directors of the company for preferential issue
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2.
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Notice sent to the shareholders regarding preferential issue
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3.
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Resolution passed by the shareholders
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4.
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Documents in support of how preferential issue benefitted the company
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5.
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Resolution passed by the company for allotment of preferential issue
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6.
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List of allottees (whether Promoters/ Non-promoters, PAN etc.)
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7.
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Auditors Certificate - Supporting documents relied upon by the auditor giving the names of preferential allottees/ promoters/ directors confirming that money raised as above has not been transferred back to the preferential allottees/ promoters/ directors directly or indirectly
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8.
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Bank statements indicating -
a) receipt of funds (highlight the entries as per list of allottees in company’s bank account, funds to be received before the date of preferential allotment)
b) utilization of funds (highlight the entries as per list of entities to whom funds were transferred & to provide copies of MOU/agreement entered into with these entities)
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d) In certain instances, it has been observed that certificate issued by the Auditor consisted of bald statements with regard to issues mentioned in the aforesaid Exchange notices without any supporting documents and adequate cross reference therein. In view of the same, in order to smoothen the process of verifying the completeness of documents, it is once again clarified that the certificate issued by the Auditor should contain adequate reasons backed by supporting documents with proper cross-reference in order to adhere to the spirit of aforesaid Exchange notices
e) After receipt of complete documents, the matter shall be placed before the Auditors Committee of the Exchange (“Committee”) to ascertain the veracity of reasons given by the company in fulfilment of conditions stated in aforesaid notices of the Exchange for revocation of suspension.
f) Wherever required company officials and / or certifying auditors shall be called for personal hearing before the Committee for providing submissions / clarification as may be sought in the matter.
g) Based on the recommendation of the Committee, the Exchange shall take further action in the matter.
h) If the certificate submitted by the company confirming compliance with each of the points for preferential issue together with relevant supporting documents and same is found to fair and reasonable by the committee then
§ Based on recommendation by the Committee, process for revocation of suspension shall be initiated
§ Upon revocation, securities may be placed in the appropriate price band as may be decided and shall be subject to extant price band review policy of the Exchange.
i) If the certificate submitted by the company is not found to be in compliance with then
§ Upon findings of the committee, a show cause notice shall be issued to the company giving findings based on the analysis carried out by the committee.
§ Based on company’s response matter shall be placed before the Disciplinary Action Committee (DAC) of the Exchange for appropriate further action.
j) It may be noted that in case of any discrepancies observed in the auditor certificate in future, the same shall be viewed seriously including referring of the case to ICAI.
In case of any clarifications, Trading Members/Company may contact Mr. Kinnar Mehta (022-22728083) / Ms. Purnima Kotian (022-22728795)
For & On behalf of BSE Ltd.
Rajesh Saraf Rajesh Gandhi
Sr. General Manager Assistant General Manager
Surveillance & Supervision Surveillance & Supervision
March 04, 2016
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