Sebi for foren­sic au­dit of 3 more sus­pected shell firms

Financial Chronicle - - FRONT PAGE - FC BU­REAU

THE Se­cu­ri­ties and Ex­change Board of In­dia (Sebi) has or­dered foren­sic au­dit of Trin­ity Tradelink, Info-Drive Soft­ware and Edy­nam­ics So­lu­tions, which also fig­ure on the list of 331 sus­pected shell com­pa­nies re­leased on June 9 by the gov­ern­ment.

These three firms are in ad­di­tion to the mar­ket reg­u­la­tor or­der­ing foren­sic au­dit of four other firms -IRIS Me­di­a­works, Hit Kit Global So­lu­tions, Kavit In­dus­tries and GV Films.

In three sep­a­rate or­ders, dated Septem­ber 13, Sebi has ob­served that prima fa­cie Edy­nam­ics So­lu­tions (ESL), Info-Drive Soft­ware (ISL) and Trin­ity Tradelink (TTL) were in­volved in mis­rep­re­sen­ta­tion of books of ac­counts.

In the in­ter­est of in­vestors, the reg­u­la­tor be­lieves that fi­nan­cials of these com­pa­nies should be in­de­pen­dently au­dited to es­tab­lish their gen­uine­ness, Sebi said.

Ac­cord­ingly, Sebi has asked ex­changes to ap­point in­de­pen­dent au­di­tors to con­duct foren­sic au­dit of these firms for ver­i­fi­ca­tion, in­clud­ing their cre­den­tials /fi­nan­cials. Be­sides, pro­mot­ers and di­rec­tors of the firms have been al­lowed only to buy se­cu­ri­ties of these com­pa­nies. But the shares held by them in these firms would not be al­lowed to be trans­ferred for sale, by de­pos­i­to­ries.

Pend­ing the au­dit, the reg­u­la­tor said, trad­ing in se­cu­ri­ties of ESL and ISL would be re­verted to T and XD group of BSE, re­spec­tively, with ap­pli­ca­ble price band.

“The trad­ing in se­cu­ri­ties of TTL shall be re­verted to the sta­tus as it stood prior to is­suance of let­ter dated Au­gust 7, 2017 by Sebi,” the reg­u­la­tor noted.

With re­gard to ESL, Sebi said that there is prima fa­cie ev­i­dence that firm has not de­ployed the pro­ceeds of IPO in ac­cor­dance with the ob­jects of the pub­lic is­sue. “I note that dur­ing the hear­ing, ESL was asked cer­tain spe­cific queries/in­for­ma­tion in that re­gard along with rel­e­vant doc­u­ments to sub­stan­ti­ate the same, but it has failed to sub­mit any sat­is­fac­tory re­sponse to the same. I find that there is prima fa­cie ev­i­dence, by ad­verse inference, of mis­use of funds by ESL,” Sebi whole-time mem­ber Mad­habi Puri Buch said.

In the case of ISL, Buch said “there are nu­mer­ous, of­ten sig­nif­i­cant con­tra­dic­tions/mis­matches in the books of ac­counts of the com­pany, fig­ures have been wrongly men­tioned”.

With re­spect to TTL, Buch said there is “prima fa­cie ev­i­dence of mis­rep­re­sen­ta­tion of busi­ness/fi­nan­cials as well as of mis­use of funds/ the books of ac­counts of the com­pany”.

While the curbs were im­posed on the 331 firms from Au­gust 8 on­wards, they were eased with re­gard to some com­pa­nies fol­low­ing ap­peals against the rul­ing.

In some in­stances, the se­cu­ri­ties ap­pel­late tri­bunal (SAT) asked the reg­u­la­tor to con­tinue with its probe and pass or­ders ex­pe­di­tiously.

The reg­u­la­tor found that the com­pa­nies iden­ti­fied as shell firms were po­ten­tially in­volved in mis­rep­re­sen­ta­tion in­clud­ing of their fi­nan­cials and busi­ness in vi­o­la­tion of list­ing reg­u­la­tions.

The reg­u­la­tor found that the com­pa­nies iden­ti­fied as shell com­pa­nies were po­ten­tially in­volved in mis­rep­re­sen­ta­tion in­clud­ing of their fi­nan­cials and busi­nesses in vi­o­la­tion of list­ing reg­u­la­tions.

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