NEW DELHI: Markets regulator Sebi has barred former directors of Firstobject Technologies from the capital market for fraud in the company's IPO process.
However, the company was let off with a warning as its entire management team has changed.
It was alleged that Firstobject Technologies, earlier known as IQMS Software, and its former directors transferred funds to two groups -- Kalpesh K Chawalla-Hemnag Jangla group and Pankaj A Desai group -- to get its shares subscribed so as to comply with the minimum subscription norm of 90 per cent.
"... IQMS got its public issue subscribed by the said two groups by 22.71 per cent using the funds of IQMS in order to circumvent the provisions of the Companies Act... so as to avoid refund of the subscription amount falling below the minimum level of 90 per cent," Sebi said in its order.
"... such activities pose a prudential threat to the market integrity and orderly development of securities market... the transaction in question had taken place long back in 2000."
Sebi did not impose a monetary penalty on Firstobject, saying that the company has shown a reasonable progress under the new management and "any direction against the company will have an impact on the price of the scrip which will affect nterests of the current public shareholders".
The regulator has advised Firstobject not to indulge in fraudulent activities and asked it to be "cautious while dealing in the securities market in future".
In 2000, the company came out with an IPO to raise Rs 4.5 crore. In all, 2,592 applications for 44,34,500 shares were found to be valid and the allotment of shares was made accordingly. The IPO was subscribed 98.54 per cent, according to the order.
The order said Kalpesh K Chawalla, Hemnag Jangla Group and Pankaj A Desai Group applied for shares through 34 applications. They were allotted 10,07,200 shares in the IPO, which constituted 22.71 per cent of the total shares allotted. In a separate case, Sebi also barred Kalpesh K Chawalla, Hemnag Jangla and seven other entities for three years for fraudulent trading in the scrips of Firstobject.
The entities were accused of pre-meditated reversal trades creating a misleading appearance of liquidity in the market.
Sebi said during November 14-December 15, 2000, the price of the scrip jumped to Rs 41.80 from Rs 19.
The entities violated certain provisions of Sebi
Prohibition of Fraudulent and Unfair Trade Practices) Regulations and created reversal trades to increase the price, the regulator said.
Among other entities barred from the market are Darshan P Desai, Goldsmith Equifin, Harvic Management Services (I) Ltd, Havmore Financial Services (I), Raj Investments and Jignesh N Shah. The regulator said these orders come into force with immediate effect.