Mumbai: Cracking the whip on illegal money pooling activity, Sebi today restrained Odisha-based Micro Finance, its directors and promoters from raising funds and barred them from the capital markets.
According to Sebi, the firm raised nearly Rs 89 crore from over 1.21 lakh investors in Odisha through issuance of 'Cumulative Convertible Preference shares (CCPS)'.
Such activities were prima facie in violation of various norms, the Securities and Exchange Board of India said in an order today.
As per the capital market regulator, these activities by the company were prima facie in violation of various norms.
The capital market regulator noted that as the issue by company was made to 50 or more persons, it was under a legal obligation to get listed on a stock exchange.
Among others, it was also mandatory for the firms to bring out a prospectus with respect to the public issue.
Sebi said that in view of the violations by Micro Finance and to restrain the company from carrying on such activities "it becomes necessary for Sebi, as the regulator for the securities market, to intervene and issue suitable directions".
Accordingly, Sebi said that Micro Finance as well as its promoters and directors "are restrained from mobilising funds through the issue of cumulative convertible preference shares or through the issuance of equity shares or through any other form of securities, to the public and/or invite subscription, in any manner whatsoever, either directly or indirectly till further directions".
The company and its officials have also been prohibited from the capital markets as well as from issuing offer documents, advertisement for soliciting money from the public for the issue of securities, till further directions.
Further, the Sebi order has asked them not to divert or dispose any funds raised from public at large including assets brought from such money.
The company would also have to provide a full inventory of all its assets and properties as well as furnish complete and relevant information sought by Sebi in the matter.
Sebi had begun a probe in the matter after it had received an investor complaint in 2013 against Micro Finance alleging that it had defaulted on the payment of interest on the investments.
The regulator also had received a reference dated September 12, 2013, from the Economic Offence Wing - Odisha Police, which stated that the company had collected huge funds from thousands of investors on the pretext of issuance of CCPS through its 33 branches in Odisha.