SEBI Imposes Rs.34 Crore On Brightcom Group And Promoters For Misrepresenting Financials
The Securities And Exchange Board Of India Has Penalized Rs.34 Crore On Brightcom Group Ltd, Its Promoters, And Others For
SEBI Imposes Rs.34 Crore On Brightcom Group And Promoters For Misrepresenting Financials
Strap – Notes that the violations were to defraud investors and to offload their shares at elevated prices
The Securities and Exchange Board of India (SEBI) has penalized Rs.34 crore on Brightcom Group Ltd, its promoters, and others for misrepresenting the company’s financial statements.
The capital market regulator imposed Rs.15 crore each on promoters M Suresh Kumar Reddy and Vijay Kancharla. Barred them from the securities markets for five years, it restrained them from acting as director or key managerial personnel (KMP) in a listed company or a SEBI-registered intermediary for five years.
A fine of Rs.2 crore was levied on Y Srinivasa Rao and Rs.1 crore each on Brightcom and Yerradoddi Ramesh Reddy. They were barred from the securities markets for one year and prohibited to acting as director or a KMP in a listed company or a SEBI-registered intermediary for one year.
Brightcom is a leading global provider of comprehensive online digital marketing services. It deals with direct marketers, brand advertisers and marketing agencies.
Ananth Narayan G, a whole-time member of SEBI remarked, "Non-compliance with accounting standards by Brightcom has resulted in egregious misrepresentation of its financial statements for the FY’s 2014-15 to 2019-20. There was a significant delay in the recognition of material adverse
SEBI noted that accounting irregularities led to artificial inflation of headline profits of Rs.1,280.06 crore during FY 19-20.
It directed the company to disseminate the standalone financial statements of each subsidiary on its website for the FY 2014-15 to 2021-22, within 15 days.
The regulator noted that the noticees were executive directors, audit committee members and KMP during different periods.
Thus, they were responsible for the company’s day-to-day affairs and management and approved the misrepresented financial statements.
The violations related to accounting standards and disclosures, including incorrect shareholding patterns between 2014-15 and 2019-20. It enabled the promoters to offload their shareholding from 40.45 percent in March 2014 to 3.51 percent in June 2022.
Meanwhile, Suresh Reddy and Vijay Kancharla were also part of the promoter group, which offloaded their shareholding. Being a part of the fraudulent scheme, Brightcom, Suresh Reddy, Kancharla, Ramesh Reddy and Srinivasa Rao prima facie enabled the promoter group to gain illegally.
The entities violated the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) rules.
On receiving complaints from October 2020 to March 2021, the market regulator passed an interim order-cum-show-cause notice on 13 April 2023 against Brightcom, its promoters and directors, alleging misstatements and accounting irregularities.