SEC bars RN Spinning directors’ share selling

Sunday, June 23, 2013

The Securities and Exchange Commission Wednesday barred the selling of shares by sponsors and directors of RN Spinning Mills in the wake of alleged anomalies in the company's rights offer. The directive will be effective from today (Thursday) and until further order, no sponsors and directors will be able to sell their shares, according to a SEC statement.

In the matter of rights offer the SEC had sought some documents which later were proved fake. Therefore, SEC will also file criminal cases against the company leaders. The regulator’s move comes in response to the request by the Dhaka Stock Exchange to impose restrictions on share transaction of sponsors and directors of the company.

A DSE probe panel found massive irregularities in the rights issue process of RN Spinning. A rights issue is an issue of additional share by a listed company to raise capital from existing shareholders. With the issued rights, the existing shareholders have the privilege to buy a specified number of new shares from the firm at a particular price within a specified time. A rights issue is in contrast is an initial public offering, where shares are issued to the general public through market exchanges. RN Spinning undertook a rights issue this year which was closed on March 13, but it did not credit the rights shares to the beneficiary owners' accounts, as per SEC rules, within the 21 workdays of expiry of the subscription period.

A large portion of the rights issue had remained unsubscribed, the majority of which were from sponsors and directors of RN Spinning and underwriters of the issue, who had assured of subscription but did not follow accordingly.

In January, the SEC approved RN Spinning Mills' rights offer to issue 13.91 crore ordinary shares of Tk 20 each totalling Tk 278.28 crore. The company had offered one rights share for each existing share and took Tk 10 as a premium for each share in addition of Tk 10 face value.
The company had eventually managed to sell rights shares worth Tk 180 crore.

The SEC in June launched a probe into the delay in crediting the rights shares by the company, and the matter is now in the enforcement department of the regulator for the next course of action.