Sebi warns cos against fraud NCD, NPS issues; cautions people

Making public a list of 193 unlisted companies fraudulently raising money from public, market regulator Sebi today warned such firms and their directors of 'stringent action' and asked investors not to be lured by their schemes.
The warning comes amid a continuing crackdown by Sebi against various unlisted companies that have lured retail investors by issuing securities such as non-convertible debentures/non-convertible preference shares in the garb of private placement.
Since January 2013, Sebi has taken action against 193 entities for issuance of non-convertible preference shares (NPS) or non-convertible debentures (NCDs) to public without complying with the Sebi regulations.
So far in 2015 itself, Sebi has passed orders against 123 companies in such cases.

Securities were issued by these companies without complying with the prescribed Companies Act and Sebi norms.
The companies against which action has been taken include Togo Retail Marketing, Shah Group Builders, Aspen Nirman India, Megasys Healthcare, Siyaram Development and Construction, Matribhumi Projects and Goldmine Agro.

"Companies are cautioned not to issue securities to public without complying with provisions of law...Failing which Sebi will be constraint to take stringent action against such companies and their directors," Securities and Exchange Board of India (Sebi) noted.
"Investors are also cautioned not to subscribe to such issues. Investors are advised to see whether any such entity has filed offer document or filed application with Stock Exchange for listing," it added.

As per the Companies Act, any offer of securities made to 50 or more persons has to be construed as a "Public Offer".
The new Companies Act also mentioned that "Private Placement" has to be made only to such persons whose names are recorded by the company prior to the invitation to subscribe.
It further says that in case of private placements, the company shall not release any public advertisements or utilise any media, marketing or distribution channels or agents to inform the public at large about such an offer.
Besides, such offer or invitation shall not be made to more than 200 persons in the aggregate in a financial year, the sectoral guidelines say.

Moreover, under the norms no issuer can make public issue of these securities, unless it has made application to the recognised stock exchanges for listing of such securities.
The issuer, among the other things, is required to file the offer document with Registrar of Companies and stock exchanges and has to make necessary disclosures.