The Bangladesh Securities and Exchange Commission on Tuesday fined Dragon Sweater and Spinning Ltd Tk 30 lakh for using 53 per cent of its initial public offering fund while violating securities rules.
The capital market regulator took the punitive measures against the company based on findings of a special audit conducted by BSEC.
The commission in its press release issued on Tuesday said the commission found that the company did not purchase machinery as per declaration, failed to maintain deadline for project completion and violated a number of securities rules that ultimately resulted in misrepresentation of event.
The special audit found that Dragon Sweater and Spinning had spent more than Tk 21 crore of its initial public offering fund through cash transactions, in violation of securities rules.
As spending IPO fund through cash transactions raises question about the fair use of money, the commission imposed the penalty, an official of BSEC told New Age.
If the capital market investors’ money was not utilised properly, the company would fail to deliver returns to investors in future, the official said.
In 2015, Dragon Sweater through IPO floated shares worth Tk 40 crore for machinery import, civil construction of building, installation and transportation of spare parts to meet the working capital requirement and IPO expenses.
As per a condition imposed by the BSEC under section 2CC of the Securities and Exchange Ordinance, 1969, ‘The fund collected through public offering shall not be utilised prior to listing with stock exchanges and that utilisation of the said fund shall be effected through banking channel, through account payee cheque, pay order or bank drafts.’
Dragon Sweater, however, in its IPO fund utilisation report showed that the entity spent Tk 17.89 crore for building construction in cash, the special audit revealed.
Besides, the entity also showed that it had spent Tk 2.55 crore as working capital, Tk 87.12 lakh for import of machineries and Tk 12.42 crore to meet IPO expenses in cash, the report said.
Earlier in 2014, the capital market regulator fined Dragon Sweater Tk 5 lakh for providing false information about acquisition of land in the IPO document.
The regulator also fined Dragon Sweater’s issue manager First Securities Services Ltd Tk 5 lakh for not checking the information before applying to the commission for IPO.
The capital market regulator at the meeting also fined brokerage house M Securities Limited Tk 10 lakh for violation of different securities rules including rules 11 stock-dealer, stock-broker and authorised representative rules, 2000 as deficit was found in the brokerage house’s consolidated customers account, meaning that the entity used the fund for other reasons.
Besides, the commission warned Dhaka Dyeing and Manufacturing Company Limited, its issue managers— Citizen Securities and Investment Limited and BMSL Investment Limited— for providing faulty rights offer document.
On the other hand, the market regulator on Tuesday approved draft prospectus of an open-end mutual fund, Credence First Shariah Unit Fund, with an initial target size of Tk 10 crore.
Of the target size, Credence Asset Management Company Limited, the asset management company of the fund, would provide Tk 1 crore as sponsor of the fund, while the rest amount would be collected from investors.
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