SEBI prohibits Brightcom’s auditors from engaging with the company, bars CMD and CFO from board positions
Market regulator SEBI issued an interim order against Brightcom Group (BGL) on August 22, demanding that the company cease any engagement with its statutory auditors, P. Murali & Co. and PCN & Associates, along with their present and past partners, until further notice. This action stems from suspicions of accounting irregularities and misstatements in BGLs financials. Notably, this marks a rare instance of SEBI releasing a second interim order on the same entity. An earlier order-cum-show cause notice was issued on April 13, 2023, to BGL, its Chairman and Managing Director (CMD) Suresh Kumar Reddy, and others after investigations uncovered accounting malpractices.
The recent interim order has taken a firm stance, revealing that BGL and others manipulated preferential allotments through fabricated receipts of share application money and fund misappropriation. As a consequence, SEBI has prohibited Suresh Kumar Reddy and the company’s CFO Narayan Raju from holding directorial or Key Managerial Personnel positions in listed companies or subsidiaries. Suresh Kumar Reddy has also been barred from securities dealings. Moreover, 23 entities are restricted from selling their BGL shares directly or indirectly.
The order highlighted BGLs attempt to conceal wrongdoing by submitting forged bank statements and questioned the accuracy of the company’s historical financial statements and stock exchange disclosures. The investigation delved into the allotments made to 22 entities in the preferential issue, hinting at potential discrepancies for the remaining 60 allottees. However, the company and its Key Managerial Personnel did not cooperate with the probe.
SEBI’s investigation exposed accounting discrepancies amounting to over Rs. 1280 Crore during FYs 2018-19 and 2019-20. The interim order expressed fears that the CMD and CFO might obstruct the ongoing inquiry. In a related matter, SEBI referenced a previous investigation that unearthed further accounting irregularities and misstatements in BGLs financial statements.
