The securities regulator has fined the shareholder directors and managing director of Kattali Textile Mills for violating its commitment on utilising the proceeds from its initial public offering (IPO) in 2018.
The controversial company had tried to mislead the securities regulator in this regard by filing false updates and submitting fake bank statements to back their false claims.
The Bangladesh Securities and Exchange Commission (BSEC) made the decision in a meeting on Thursday with its chairman Professor Shibli Rubayat-Ul-Islam in the chair, said a press release.
The capital market regulator said the managing director will have to pay Tk1 crore in fine, which is Tk50 lakh for other directors each except for the independent and nominated directors.
The company website shows it has six directors – including the managing director and board chairman – and two independent directors who are not its shareholders.
Kattali Textile IPO was highly controversial and there were complaints from some investors that the company depends only on rental income from its factory building in Chattogram, instead of using the facility for its own operations.
The IPO fund was not necessary for the company's business at all, claimed the investors who had also shared a video on social media where some workers had revealed the truth without knowing that they were on record.
However, the company kept denying the allegation and maintained that it had a constructive purpose for the IPO and a good plan to utilise the fund.
Interestingly, no one – from the issue manager, auditor, stock exchanges and regulator – had found the allegation to be true at that time.
After its listing, the company appeared to be in serious irregularities and now in fraudulence.
Promoters and directors now own only 30 percent shares of the company, while the rest are in the hands of institutional, individual and foreign investors.
Stock price of Kattali Textile is now below its face value of Tk10 each, while after debut it was traded at above Tk30.
The BSEC, in the same meeting, decided a hefty fine for manipulating the stock price of Quasem Drycell Limited.
The regulator's investigation revealed that four individuals along with their fellows and a brokerage firm had manipulated Quasem Drycell share price in 2015-16.
Their unusual trading fuelled the stock price from below Tk70 in late October of 2015 to above Tk130 in the early January of 2016.
The company later changed its name to Quasem Industries Ltd after it had included some other businesses in its portfolio.
However, for the nearly 90 percent price hike in less than four months and gaining profits illegally, Narayan Chandra Paul and Associates will have to pay Tk3 crore in fines.
Brokerage firm Prime Islami Securities is fined Tk1.5 core, Md Mahmuduzzaman, his partner Md Mahibul Islam are jointly fined Tk30 lakh, and Solaiman Rubel and Associates Tk10 lakh.
Quasem Industries shares are now trading at below Tk35 each.
The BSEC has also decided to issue a warning letter to seven stockbrokers for violating the securities law. The brokerage firms are Ace Capital Management Services, Reliance Brokerage Services, Premier Leasing Securities, SIBL Securities Ltd, Quayum Securities, SR Capital, and Latif Securities Ltd.