Sebi cracks down on companies raising public funds illegally

Market regulator has also initiated action in many CIS cases and companies that raised close to Rs 4,000 crore

Regulator Sebi has begun coming down hard on entities raising public money illegally through issue of 'redeemable preference shares' and similar instruments, as also through sister concerns after being barred from markets.

Action has been initiated in a number of such cases in the past one month, wherein close to Rs 5,000 crore had been raised through issuance of such securities.

These cases are other than those involving illicit 'Collective Investment Schemes'. Sebi has also initiated action in many CIS cases and companies that raised close to Rs 4,000 crore have been asked to wind down their schemes.

In connection with violation of capital markets norms in issuance of RPS and other securities, at least 7 companies, as also their promoters and directors, faced strict action by the Securities and Exchange Board of India in July itself.

These firms were found to have issued debentures and preference shares without complying with the necessary regulatory laws.

Another eight companies faced Sebi crackdown last month for violation of CIS regulations and these include some companies based in Kolkata.

There are some sister concerns of companies that were earlier barred from raising funds as well as from launching investment schemes earlier, shows an analysis of recent orders passed by Sebi.

The regulator in one of its orders has now restrained Saiprasad Corporation from raising funds from the public through its schemes. The regulator had earlier last year barred two group companies, Saiprasad Foods and Saiprasad Properties, from raising funds from the public.

Similarly, Nicer Green Housing Infrastructure Developers was prohibited by Sebi on July 28,2014 from raising further funds while it had issued restraining order against another group company Nicer Green Forest in March last year.

In one of its biggest crackdowns, Sebi has barred Pancard Club India which had raised more than Rs 3,000 crore from nearly 25 lakh investors.

Sebi had also cracked down on firms raising money from the public by issuing securities such as Redeemable Preference Shares and Non-convertible Preference Shares, among others, without following the public issue norms.

During last month, Sebi had prohibited Kolkata-based companies -- PAFL Industries, Sunplant Forgings and Sunplant Constructions -- from raising money through issue of securities, till further directions.

Similar orders were also issued against Mega Mould which had raised Rs 716 crore from investors and Wasankar Wealth Management (Rs 12.89 crore), during the month.