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The stock market watchdog has finally decided to take stern actions against all individuals responsible for the scam tied to the 2019 IPO of Ring Shine Textiles.
In a press release issued on Monday, the Bangladesh Securities and Exchange Commission (BSEC) said it had decided to involve the Anti-Corruption Commission (ACC) in investigation and legal actions against those who had facilitated the floating of the IPO through fraudulent means.
As many as nine people, including the sponsors of Ring Shine Textiles, former directors, former managing director and former executive director will face punitive actions.
Auditors, issue managers, and the alleged mastermind -- Abdul Kader Faruk, chairman of Far Group -- will also have to face the music in connection with the IPO scam, as per the press statement.
The BSEC has also asked the ACC to look into the illegal contract that the Ring Shine directors had signed with Abdul Kader Faruk to help float the IPO instead of deploying an issue manager.
Before the floating of the IPO, Ring Shine Textile was a company of only Tk 100-million paid up capital.
To collect Tk 1.5 billion by issuing primary shares, the company inflated the balance sheet by showing that it issued 275.10 million shares at Tk 10 each through private placements. It did not receive any fund for the shares disbursed.
However, the paid-up capital was shown to have increased from Tk 100 million to Tk 2.85 billion before the listing in 2019.
The whole thing was masterminded, according to earlier probes, by Abdul Kader Faruk, who employed corrupt issue manger and corrupt auditors to execute the IPO plan.
Two investigations of the scam were carried out - one by the securities commission in 2020 and another was a special audit by the audit firm -- Hoda Vasi Chowdhury -- in 2021.
The stock market regulator has also decided to impose a travel ban on 13 individuals, including Mr Faruk, Indian national Ashok Kumar Chirmar and sponsors, former directors, former managing director, former executive director and former CFO of the company.
Mr Chirmar brokered the deal between the company and Mr Faruk.
Meanwhile, the BSEC banned top executives of IPO managers from capital market activities for five years for providing due-diligence certificates despite the fact that the financial numbers in the prospectus were false.
Due diligence certificate is the confirmation that the company has been assessed for risks and opportunities and that business transactions made by the company were sound and well understood.
The Monday's press release says IPO managers -- AFC Capital and CAPM Advisory - will have their licences cancelled.
However, the FE has already reported that AFC Capital surrendered its licence in December 2023.
The securities regulator will also punish four auditors for approving fabricated financial statements of Ring Shine Textiles.
The auditors are Ahmed & Akhter Chartered Accountants, Shiraz Khan Basak & co Chartered Accountants, Mahfel Huq & co Chartered Accountants, and ATK Khan & co Chartered Accountants.
The names will be forwarded to the Financial Reporting Council (FRC) for action.
Moreover, those, who had obtained placement shares without paying a penny, will come under ACC actions.
The company's directors sold out pre-IPO shares, which they had received for free, after the listing of Ring Shine Textiles on the stock exchanges. Many of them fled Bangladesh with the money.
The money was transferred to many individual accounts outside the country from the company's account on the pretext of asset and machine purchase.
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