Widely read:
Anand Kumar
Over the last few days, the investment media and social media have been abuzz with SEBI's interim order regarding a company named Brightcom. If you have any interest in the equity markets at all, you too must have heard all about it. The promoter and CFO of Brightcom have been prohibited from holding directorial positions and have been barred from the securities markets. 21 others, including a well-known stockbroker who is in the financial media a lot, have been prohibited from selling their holdings in the company.
At one level, I find it tedious and tiresome and a waste of time to even read any news about this company and this sordid scam, let alone make the effort to write about it. On social media, there are two kinds of reactions to this news. One is of shock and horror that goes, "OMG what a terrible thing, we investors are being looted" and the other is, "So what else did you expect from this company?" Personally, I'm firmly in the second camp. If you Google the names Brightcom, Ybrant and Lycos you will come across news dating back at least nine years which will make it very clear what kind of outfit this is. You will not find a single news item that does not smell fishy. In fact, 'smell fishy' is a very gentle way of putting it, the stink is so rotten that you will have to hold your nose to even read the news items.
And yet, there are still investors who are falling for blatant pump-and-dump scams in this stock. Presumably, they have not even done one single Google search for this company, let alone actual research. It sounds harsh to say 'serves you right' but when someone on Twitter/X tells that to investors in this stock, one can't help but agree regardless of the high profile of people who have been recommending this stock. There's something called Wittgenstein's Ruler, named after the Austrian philosopher Ludwig Wittgenstein which says something like "When a ruler measures a table, the table also measures the ruler." If someone appears on a business channel and recommends Brightcom, then that tells you something not about that stock, but about that person and that news channel.
However, all this aside, there's a larger issue here that goes far beyond Brightcom, its promoters, their cheerleaders and the punters who believed in them. After all these years, why does Brightcom still exist as a listed company that is able to maintain all outward appearances of an audited and regulated company whose stock the public can buy and sell on the stock exchanges?
The analyses of Brightcom's financial statements that are now appearing are flabbergasting. For example, as one analysis pointed out, in the last financials, the auditors did not audit 14 out of 16 subsidiaries. These mystery subsidiaries account for 94 per cent of the consolidated assets, 82 per cent of consolidated revenue, and 100+ per cent of the total profit. And yet, these auditors signed the accounts and just noted this fact. When I read this, I was immediately reminded of the speech that Prime Minister Modi gave at ICAI's 'CA Day' function back in 2017. I'm sure every auditor knows what I'm referring to.
Clearly, the continued existence of such rackets is a failure of the entire paraphernalia of financial regulation which starts with the auditors but also includes SEBI, the stock exchanges and yes, the financial media, which glibly gives a platform to such outfits. The real problem is that there's never just one cockroach in a kitchen. If one Brightcom exists, that's proof that there must be many more running rackets which are just minor variations on the same theme. Every sensible investor can avoid them by doing a modicum of research, but that's not a systemic solution. Bolting the stable after the horses have flown is also not a systemic solution. It's quite clear what will solve this problem - the question is, will that be done?
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