The stock market regulator has fined RN Spinning Mills – a concern of Far Group – for not providing supporting documents of the Tk183 crore transaction mentioned in their financial statement and for misusing their rights share fund.
Recently, five directors including the managing director of RN Spinning were fined Tk1 crore in total, said sources at the Bangladesh Securities and Exchange Commission (BSEC).
The company has not been in operation since a fire devastated its factory in 2019.
According to BSEC sources, RN Spinning claimed to have spent Tk47 crore on land and machinery in 2014. The company also claimed to have paid Tk53 crore to its affiliate ML Dyeing, transacted Tk27 crore with ARS Sweater and Total Spinning and taken Tk59 crore from two directors of the company. However, they did not show any bank statements or documents for these transactions to the auditor.
When BSEC's inquiry committee asked for information on the matter, RN Spinning could not provide it. Instead, in a hearing with the BSEC, company officials claimed there was no bank statement because the transactions were made in cash.
Rejecting the company's explanation, the BSEC fined the company's director Tk50 lakh for misleading ordinary investors with false information.
After BSEC allowed RN Spinning to raise Tk278 crore by issuing rights shares in 2012, it was able to raise Tk120 crore. However, the company did not spend the money according to the plan approved by the commission, which is a violation of the Securities Act. For this reason, five directors of RN Spinning have been fined Tk50 lakh.
Asked why the company is punished now based on the investigation conducted in 2016, a senior BSEC official told TBS that only the previous BSEC chairman could explain why the commission did not take earlier actions. The current commission has taken swift actions after conducting a further investigation against the company.
Meanwhile, Far Group has taken initiatives to re-open RN Spinning by merging it with another of their concerns.
The BSEC is also looking into the merger to ensure that the general investors' interests are protected.
In January this year, RN Spinning disclosed that its board had decided to merge the company with Samin Food and Beverage Industries and Textile Mills – a non-listed firm of the Far Group.
Samin Food and Beverage Industries and Textile Mills went into operation in FY19.
Its textile unit has a capacity of producing 79,848 spindles of cotton, viscose, and CVC yarn annually. The company has not started its food and beverage unit yet.
RN Spinning raised Tk30 crore through an initial public offering (IPO) in 2010.
The company was in profit in FY17 and FY18, but in the following fiscal it incurred a loss of Tk607.11 crore due to the fire incident.
The firm continued to incur losses in the following years. In FY21, its cumulative loss stood at Tk446.68 crore.
Ex-CEO of Prime Islami Securities fined
BSEC has fined Abul Kalam Yazdani, former chief executive officer of Prime Islami Securities, Tk5 lakh for helping sell the shares of a sponsor of Family Tex without an announcement in June, said sources at the securities regulator.
BSEC has also fined Usmania Glass's corporate sponsor Prime Islami Life Insurance Tk5 lakh for selling shares without making prior declarations. It has also fined Prime Islami Securities Tk3 lakh for assisting in this.
Moreover, BSEC has imposed a Tk20 lakh fine on East Coast Securities – a concern of East Coast Group – and its chief executive officer for not assisting BSEC during an investigation.