DISTORTION IN IPO FUND UTILISATION

BSEC halves its fines on Dragon Sweater

Mostafizur Rahman | Published: 01:12, Apr 08,2018

 
 

The Bangladesh Securities and Exchange Commission has halved the total fines imposed on Dragon Sweater and Spinning Ltd to Tk 15 lakh although the regulator found distortion in utilisation of Tk 21 crore of the company’s initial public offering fund.
The decision of slashing the fines came at a commission meeting on Tuesday.
Earlier on January 8 this year, the commission slapped Tk 30 lakh fine on the company as it found that Dragon Sweater had spent more than 53 per cent or Tk 21 crore of its IPO fund through cash transactions, deviating from securities rules.
The commission also 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 financial statements.
Some of the senior officials of BSEC said that while penalising Tk 30 lakh was not enough against the distortion of Tk 21 crore, the decision of cutting penalty would pave the way for committing frauds by the companies.
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.
A BSEC official said that the commission imposed the condition of using IPO fund through banking channel with a view to preventing any misuse of the fund.
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.

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