Sebi prohibits two firms from raising funds from public

Sebi today barred AM Fund Managers and Rightmax Technotrade International from raising funds through issuance of securities to the public while restraining the firms and their directors from dealing in markets till further directions.
The Securities and Exchange Board of India (Sebi) found that these companies had garnered crores of rupees from several investors via issuance of Redeemable Preference Shares (RPS)and through such activity had "prima facie" violated various norms.
The Sebi observed that these firms issued preference shares to over 50 persons each which under the rules made it a public issue of debt securities and hence would require a compulsory listing on a recognised stock exchange.

These companies were also required to file a prospectus, among others, which they failed to do.
AM Fund Managers and Rightmax are prima facie engaged in fund mobilising activity from the public, through the offer of RPS, and as a result of such activity has violated the provisions of the Companies Act, the Sebi said in an interim order.
Accordingly, the Sebi has asked AM Fund Managers and Rightmax not to "mobilise any fresh funds from investors through RPS or through the issuance of equity shares or any other securities, to the public and/or invite subscription, in any manner whatsoever, either directly or indirectly till further directions."

Further, these companies and their respective directors are barred from issuing any offer document or advertisement for soliciting money from the public for the issue of securities. They are prohibited from dealing in capital markets.

The Sebi has also asked the entities not to dispose any of the properties or assets acquired by that company through the issue of redeemable preference shares, without prior permission from the regulator as well as not to divert the funds raised from public.
While asking AM Fund Mangers and Rightmax to provide a full inventory of all its assets and properties, the Sebi has also asked these companies to within 21 days from the date of receipt of the order submit all relevant and necessary particulars sought by the watchdog.

These "directions shall take effect immediately and shall be in force until further orders."
According to Sebi, AMF allotted 12,13,500 RPS to 222 investors and mobilised funds amounting to Rs 1.21 crore during 2009-10 and 2010-11, while Rightmax allotted 13,203 RPS to 2,763 general public and garnered money to the tune of Rs 13.13 crore in 2010-11.