Going by the existing law, only the subsidiary of banks and financial institutions with paid-up capital of Rs 1 billion can operate mutual funds.[break]
However, Sebon had found RIF of collecting money from the general people, promising annual interest return of 10 percent, to invest on shares.
Interestingly, the company is headed by Nirmal Pradhan, who is one of the largest investors in Nepal´s share market.
As a part of taking action against the firm, Sebon on Tuesday sought clarification from the company for operating mutual fund in an unauthorized way. “We have instructed the company to furnish clarification within 15 days as per the existing laws,” said a source.
Sebon -- the security market regulator -- had come to know the unauthorized operation of the company when it approached the board, seeking permission for initial public offering (IPO). The company had sought permission to issue 123.2 million units of ordinary shares through IPO.
“The minute of the company´s latest annual general meeting and its annual report clearly spelled that the company planned to operate as per the concept of mutual fund,” the source told Republica.
As per the information furnished by RIF to Sebon, the company has been operating with a paid-up capital of Rs 246.8 million. With the proposed sales of ordinary shares through IPO, it was planning to raise the total paid-up capital to Rs 370 million. The company nine months ago had 170 promoters, a sharp rise from 18 when the company was established three years ago.
According to the report, the company during the span of three years of operations has made a total investment of Rs 700 million. Of that, it had invested Rs 640 million in shares and remaining Rs 60 million in housing and real estate.
“We found its investment disproportionately higher than capital and loans it took from the formal financial institutions. This means the company could have collected huge money from general public,” the Sebon official said.
If the company did not give convincing clarification, which officials rule out given its case, Sebon can slap a fine of as much as Rs 150,000 as a penalty to each promoters.
“All promoters, who endorsed the decision to operate mutual fund, will be penalized. Still more, this action will make all of them ineligible to become the board of director or hold top managerial posts in any of the public limited company,” the source added.
Pradhan, however, denied the charges, stating that the company is not involved in collecting money from general public.
“We have not collected money,” Pradhan said. He, nonetheless, added that the company has invested the public money in shares, housing and hydropower sector.
prabhakarji@gmail.com
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