The Bangladesh Securities and Exchange Commission (BSEC) has stepped up its crackdown on listed companies over the misuse of funds raised from investors through initial public offerings (IPOs), with company directors increasingly facing personal financial liability.

The latest enforcement action targets Regent Textile Mills, where five directors have been fined a total of Tk 1 billion for failing to refund IPO money that the regulator determined had been improperly used.

The BSEC imposed a Tk 200 million penalty on each of directors Md Yakub Ali, Md Yasin Ali, Tanvir Habib, Mashruf Habib and Salman Habib. They must pay the fines within 20 working days from August 22. If they fail to comply, each director will face an additional Tk 10,000 fine for every day of delay.

Regent Textile raised Tk 1.25 billion from investors in 2015 through a fixed-price IPO, with the proceeds earmarked for business expansion. A later investigation found that approximately Tk 801.1 million, including interest, was diverted to purchase a 99% interest in Legacy Fashion.

Legacy Fashion was owned and controlled by the same sponsor family associated with Regent Textile, making the transaction a violation of the rules governing the use of IPO proceeds.

The company’s directors had already faced regulatory action in 2020, when the BSEC fined them for failing to submit financial statements for 2016 and 2017 on time and for allegedly providing inaccurate information to the regulator.

The Regent Textile case is part of a wider pattern of IPO-related irregularities identified by the securities regulator. Several listed companies have either failed to spend IPO funds for their approved purposes, transferred the money to related entities or provided inaccurate information about fund utilisation.

Aman Cotton Fibrous is among the major cases. The company raised Tk 800 million through an IPO in 2018 for purchasing machinery and repaying loans. A special audit later found that about Tk 730 million had been placed in fixed deposits and pledged against loans obtained by two unlisted sister companies. The BSEC subsequently fined each director Tk 30 million.

The regulator has also taken action against Kattali Textile over alleged irregularities in the utilisation of IPO proceeds and the submission of questionable bank documents. Pacific Denims was ordered to return Tk 209.8 million after the BSEC found discrepancies in its disclosures regarding the use of IPO funds.

In another case, Aman Feed was fined after the regulator found that it had submitted false information concerning the utilisation of Tk 720 million raised through its 2015 IPO.

Meanwhile, several other listed companies, including ACME Pesticides, JMI Hospital Requisite Manufacturing, Sikder Insurance, Associated Oxygen and Techno Drugs, have yet to fully utilise their IPO proceeds within the periods set out in their prospectuses.

The BSEC said its strengthened enforcement measures are aimed at improving market transparency, protecting investors and ensuring that funds raised from the public are used strictly for their approved purposes.

The latest penalties signal a tougher regulatory approach under which directors may be held personally responsible when listed companies fail to properly use IPO proceeds, potentially increasing accountability across the capital market.