SEC suspends Blue Diamonds stake sale by Chinese Chairman

Monday, 16 May 2016 01:31 -     - {{hitsCtrl.values.hits}}

The Securities and Exchange Commission (SEC) has suspended the recent sale of stake in Blue Diamonds Jewellery Worldwide Plc (BLUE) by its Chinese Chairman Xia Liqiang.

On 9 May, Xia sold around 7% stake or 15.1 million shares of BLUE for Rs. 19.5 million. 

SEC said it has reasons to believe the trade may have been carried out in violation of the provisions of the SECT Act and may involve the commission of one or more offence(s).

Therefore the SEC has instructed the broker concerned, Capital Trust Securities to refrain from transferring the sale proceeds from the said trade to Xia or to any agent of his and to maintain the proceeds in the custody of Capital Trust until further notice. 

In the event proceeds have been released by way of a cheque to Xia or to any agent of his, SEC has directed Capital Trust to instruct the bank to stop payment.

As at December 2015, Xia held 15.46% or 32 million shares down from 18% in December 2014. 

His sell down came whilst SEC has appointed Ernst & Young as a special purpose auditor to conduct a thorough probe on alleged moves by Blue Diamonds to mislead shareholders and investors. 

In the February 2016 directive, SEC said it has received several complaints from shareholders and investors that Board of Directors of Blue Diamonds Jewellery Worldwide Plc (BLUE) have mislead shareholders and investors in relation to interim financial statements for the quarter ended on 30 September 2015 and have misused for the benefit of Related Parties, the proceeds raised at a recently concluded Rights Issue.

The scope of the Audit will be to verify utilisation of proceeds collected from the Company’s Rights Issue; indentify and quantify related party transactions and check the extent of compliance of interim financial statements with Sri Lanka Accounting Standards No 34 - Interim Financial Reporting (LKAS34).