Regulator slaps 5-year ban on Ring Shine IPO managers

The securities regulator has banned top two executives of two issue management companies from any capital market activities for five years due to their involvement in the IPO of the scam-hit Ring Shine Textiles.
The Bangladesh Securities and Exchange Commission (BSEC) has issued two separate orders, declaring the imposition of the restriction on Mahbub H Mazumdar, former managing director of AFC Capital, and Ms Tania Sharmin, former managing director and CEO of CAPM Advisory.
AFC Capital and CAPM Advisory jointly worked as issue manager for the IPO proposal of Ring Shine Textiles in 2019. They have been accused of issuing false "due-diligence certificates" to the company in violation of the Securities and Exchange Ordinance 1969.
As per the public issue rules, issue managers provide due-diligence certificates to IPO proposals, meaning they certify that all financial statements and relevant documents attached to the proposals are authentic.
The Commission said AFC Capital and CAPM Advisory had impeded the overall development of the country's capital market by facilitating the IPO of Ring Shine Textiles.
Owners of Ring Shine Textiles, who included Indonesian citizens, laundered a substantial amount of funds, working in collaboration with four local auditors.
"Both the issue managers provided false due-diligence certificates to the IPO proposal of Ring Shine Textiles," said BSEC spokesperson Md. Abul Kalam.
Issue managers are required to visit factories of the relevant companies and verify all the information given in IPO prospectuses before issuing due-diligence certificates.
But a regulatory probe discovered that the information-verification process had not been followed by the issue managers before the issuance of the due-diligence letters signed by the managing directors of AFC Capital and CAPM Advisory.
Mr. Kalam said the regulator could have slammed a penalty on them but in that case they could pay the fines and continue their activities in the capital market.
"That's why the regulator has banned them for five years so that it acts as a deterrent to others," he added.
In the regulatory orders, the commission has also directed all market intermediaries, listed companies, and other business entities to refrain from appointing Mr Mahbub and Ms Tania for any official duties during the five-year period.
The IPO of Ring Shine drew huge criticisms as the company embezzled investors' funds through deceptive means. It issued private placement shares worth Tk 2.75 billion without receiving any fund for the shares issued.
The securities regulator has taken punitive measures against Mr Mahbub and Ms Tania based on an investigation conducted in 2021.
The IPO of Ring Shine was also listed in the ToR (terms of reference) of a high-powered investigation committee formed after the fall of the previous government on August 5 last year to dig into large market scams.
A member of the investigation committee said they had submitted a report on the scam involving Ring Shine Textiles.

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