The Securities and Exchange Commission (SEC) has contacted its counterparts in US, Canada and the British Virgin Islands to secure more information on Environmental Resources and Investments (ERI) which has made inroads into the Colombo stock market and is raising concerns about its source of funding, SEC sources said.
"We have alerted the SEC authorities in these countries and they've been corresponding with us on ERI," a SEC source told the Business Times.
ERI and its four warrants saw unprecedented price hikes early this month along with a few other shares, prompting the regulators to halt trading on the warrants for two days and subsequently imposing the controversial price curb rule across the board to all stocks. Along with ERI warrants, Touchwood, Dankotuwa Porcelain and Blue Diamond were suspended from trading on August 3.
Some investors noted that the lack of transparency, absence of any tangible track record of the company and no clear strategy/ focus exhibited or communicated are the concerns over ERI.
The SEC source said there have been inquiries by investors on ERI, with regard to its nature of business, etc. "What they've provided so far needs some more authentication," he added.
ERI was restructured to become an investment holding company after Lionhart Investments Ltd of UK, took over control (93.8%) from Browns Group in 2007 when ERI was called Walker and Greg.
About two years ago ERI said that it plans to raise Rs 44 billion fresh equity with an objective of acquiring and turning around “sick” companies and to purchase a platinum mines investment company called Environmental Resources Ltd incorporated in British Virgin Islands.
From the proceeds of the rights issue held in April 2009, the company invested in Ceylon Leather Products (CLPL) and DNH Financial (Private) Ltd, 10% in People’s Merchant Bank while obtaining an 8% stake in South Asia Textile Industries Lanka through a private placement. It invested a further Rs 550 million through CLPL to obtain a controlling stake of 51% in this company. Recently the company with its subsidiary CLPL agreed to acquire 66.7% of Dankotuwa Porcelain PLC which has been approved by the shareholders.