SEC says Blue Diamond audit reveals possible fraud

Saturday, 28 May 2016 00:00 - - {{hitsCtrl.values.hits}}

The Securities and Exchange Commission (SEC) has notified the Colombo Stock Exchange (CSE) to take measures to protect investors after an audit into Blue Diamond Jewellery revealed possible misappropriation of public funds, capital market offences and transgressions under the penal code.

In a letter titled ‘Taking of interim measures for the protection of interests of investors pending the disclosure of findings of a special purpose independent audit conducted into the business affairs of Blue Diamond Jewellery Worldwide PLC,’ SEC called on the CSE to await additional investigations into the company.

The Securities and Exchange Commission of Sri Lanka (SEC) retained the service of Ernst and Young in February to conduct a Special Purpose Independent Audit on an Agreed Upon Procedure (AUP) to ascertain the conduct of the business affairs of Blue Diamond Jewellery (BLUE) and very specifically into the utilisation of proceeds that were raised by way of a Rights Issue by BLUE.

The SEC is in receipt of the reports submitted by Ernst and Young which consist of findings based upon the said AUP, which “may be price sensitive in nature” in the SEC informed the CSE.

“The above mentioned reports reveal inter-alia, several irregularities in the conduct of the business affairs of the BLUE by the management which may point to the possible misappropriation of public funds in relation to the proceeds raised by way of a Rights Issue and the possible commission of one or more capital market offences as well as offences under the Penal Code,” it said.

SEC has also commenced further investigations into the company.

BLUE has sought time to respond to the findings contained in the reports that were also made available to them, the statement added. The contents of the reports will also be released to the Colombo Stock Exchange (SEC) in due course after a response is made by the company.

“The CSE may take all appropriate steps deemed necessary for the protection of the interests of investors, and for the maintenance of an orderly and fair market, pursuant to the powers vested in the CSE in terms of the Listing Rules of the CSE, until the findings mentioned above are disclosed to the market.”