SEBI warns unlisted firms of tough action

Concerned over a large number of unlisted firms fraudulently raising money from public, market regulator Securities and Exchange Board of India (SEBI), on Thursday, warned such companies 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.

SEBI said it has taken action against 112 entities, since January 2013 for issuance of securities in the form of non convertible preference shares/ non convertible debentures to public, without complying with the prescribed provisions of law.

Such securities were issued without complying with the prescribed Companies Act and SEBI norms.

“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. 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,” SEBI said in a public notice.

So far in 2015 itself, SEBI has passed orders against more than 50 companies in such cases.

Securities and Exchange Board of India ( SEBI )