Details of fund transfer from IPO proceeds is a vital information: SEBI

Details of fund transfer from IPO proceeds is a vital information: SEBI

According to the markets regulator, SEBI, the details of fund transfer from IPO proceeds is a vital information and non-furnishing of such details is detrimental to the interest of investors in securities market.

The Securities and Exchange Board of India (SEBI) conducted an investigation in the scrip of HPC Biosciences Ltd (HPC) relating to manipulation, if any, in the Initial Public Offer (IPO) process of HPC.

During the course of investigation, the Investigating Authority of SEBI had issued summons to Mayur Developments and Leasings Ltd., (Noticee) under Section 11(3) and 11C(3) of SEBI Act, requiring it to furnish certain information with regard to transfer of funds by HPC from the IPO proceeds, which was relevant for the purpose of investigation.

The focus of the investigation was to check whether any irregularity in bidding and allotment in non-compliance with SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, to check any mis-statement in the Prospectus with regard to objects of the issue and to check whether the IPO proceeds were diverted for other than the objects stated in the Prospectus.

HPC came out with an IPO to raise 1575.00 lacs by way of issue of 45,00,000 equity shares of Rs. 10/- each at an issue price of Rs. 35/-The shares of HPC got listed on BSE-SME Segment on March 19, 2013.

It was observed that the Noticee failed to provide the details as sought for by the Investigating Authority. Therefore, SEBI initiated Adjudication proceedings against the Noticee for violation of the provisions of Section11(3) and 11C(3) of SEBI Act for not complying with the summons, under Section 15A(a) of the SEBI Act.

In this matter, the AO affirmed that it was not in dispute that the Noticee had been served with the summons, yet the Noticee failed to furnish the documents / information as sought by the Investigating Authority. It was noted that the failure on the part of the Noticees to comply with the summons had hampered the investigation.

In this connection, it was noted that it is the responsibility of every person from whom information is sought vide summons to fully co-operate with Investigating Authority and promptly produce all documents, records, information, etc., to the Investigating Authority.

It was also noted that SEBI is basically constituted to promote orderly and healthy growth of securities market apart from protecting investors' interest. For discharging this onerous job, and with a view to achieve the underlined object, SEBI as a regulator is required to conduct investigation and enquiries in the affairs of various parties from time to time.

For this purpose, first and the foremost thing is co-operation from the concerned officers of the companies not only to produce the relevant records as and when required by an investigating officer or enquiring authority or by any person authorised by the SEBI in this behalf and to appear in person as and when called upon.

In case of failure on the part of the concerned person to furnish such records/information is not only contemptuous but also a hindrance in the way of conducting smooth investigation and enquiry by the regulator to arrive at a just and fair conclusion as per the provisions of SEBI Act, 1992.

It was also observed that the material made available on record had not quantified the amount of disproportionate gain or unfair advantage made by the Noticee and the loss suffered by the investors as a result of the Noticee's default.

There was also nothing on record to assess the amount of loss caused to investors or the amount of disproportionate gain or unfair advantage made by the Noticee as a result of default.

It was affirmed that the details of fund transfer from IPO proceeds is a vital information, to ascertain any mis-utilization of IPO proceeds. Therefore, non-furnishing of the details of fund transfer as mentioned in the summons hampered the investigation and any hurdle due to non-cooperation by any person is detrimental to the interest of investors in securities market, which needs to be dealt strictly.

The SEBI thus imposed a penalty of Rs. 10 Lakhs on the Noticee i.e. Mayur Developments and Leasings Ltd. under Section 15A(a) of SEBI Act.