Sebi slaps Rs 34 crore fine on Brightcom Group, promoters for misrepresenting financials

Markets regulator Sebi connected Thursday slapped penalties totalling Rs 34 crore connected Brightcom Group Ltd, its promoters, and others, for misrepresenting the fiscal statements of the company.

The regulator imposed a good of Rs 15 crore each connected M Suresh Kumar Reddy and Vijay Kancharla -- promoters of Brightcom Group Ltd (BGL).

Apart from the penalty, Sebi besides barred some promoters from the securities markets for 5 years and restrained them from acting arsenic a manager oregon cardinal managerial unit (KMP) successful a listed institution oregon a Sebi-registered intermediary for 5 years.

The markets watchdog levied a good of Rs 2 crore connected Y Srinivasa Rao and Rs 1 crore each connected BGL and Yerradoddi Ramesh Reddy. The regulator besides barred them from the securities markets for 1 year.

Further, Sebi prohibited Ramesh Reddy and Srinivasa Rao to enactment arsenic manager oregon a KMP successful a listed institution oregon an Sebi-registered intermediary for 1 year.

Brightcom claims to beryllium a starring planetary supplier of broad online oregon integer selling services to nonstop marketers, marque advertisers, and selling agencies, Sebi said.

"I enactment that non-compliance with accounting standards by BGL has resulted successful egregious misrepresentation of its fiscal statements for the FYs 2014-15 to 2019-20. There was a important hold successful the designation of worldly adverse impairment of assets," Sebi's full clip subordinate Ananth Narayan G said successful the last order.

Further, Sebi observed that accounting irregularities led to artificial ostentation of header profits to the grade of Rs 1,280.06 crore during FY19 and FY20.

Accordingly, Sebi directed BGL to disseminate the standalone fiscal statements of each of its subsidiaries connected its website, for the play betwixt 2014-15 and 2021-22, arsenic required nether disclosure norms wrong 15 days from the day of this order.

The regulator noted that the noticees -- M Suresh Kumar Reddy, Vijay Kancharla, Yerradoddi Ramesh Reddy and Y Srinivasa Rao -- were enforcement directors, audit committee members and KMP during antithetic periods.

Therefore, they were, astatine the applicable points successful time, liable for the day-to-day affairs and absorption of BGL and were progressive successful the support of the misrepresented fiscal statements, Sebi said.

Sebi observed that the assorted violations related to accounting standards and disclosures, including incorrect shareholding pattern, which took spot betwixt 2014-15 and 2019-20, enabled the promoters of BGL to offload their shareholding from 40.45 per cent successful March 2014 to 3.51 per cent successful June 2022.

Suresh Kumar Reddy and Vijay Kancharla were besides portion of the promoter group, which offloaded their shareholding during this period, the bid said.

By being a portion of this fraudulent strategy of manipulation of fiscal statements and disclosure violations, Sebi recovered that BGL, Suresh Reddy, Kancharla, Ramesh Reddy and Srinivasa Rao person prima facie enabled the promoter radical to marque amerciable gains.

Accordingly, these entities person violated provisions of Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) norms arsenic well, it added.

Pursuant to receipt of complaints during October 2020 to March 2021, Sebi passed an interim order-cum-show origin announcement connected April 13, 2023 against BGL and its promoters/directors alleging misstatements and accounting irregularities successful the company's fiscal statements for fiscal years (FYs) from 2014-15 to 2019-20.

Further, it was alleged that accounting irregularities and different disclosure violations were portion of a strategy to defraud investors which enabled promoters to offload their shares astatine elevated prices.