The Securities and Exchange Board of India (SEBI) has ordered a forensic audit by Deloitte Touche Tohmatsu India into the financial statements of Brightcom Group, a Hyderabad-based digital marketing solutions company, for the financial years 2014-15 to 2019-20.

The market regulator has said that it found discrepancies in the disclosures by Brightcom Group that could be detrimental to the interests of investors and securities markets.

“We found reasonable grounds to believe that the disclosure of financial information and the business transactions of the company have been dealt with in a manner which may be detrimental to the interest of the investors or the securities markets,” the SEBI has said in a statement.

It felt that the company might have violated several provisions of the SEBI Act 1992, Securities Contracts (Regulation ) Act, 1956, and the Companies Act 2013.

The auditor would check if there are any manipulation of books of accounts of the company and its subsidiaries; misrepresentation of consolidated financials and business operations; and wrongful diversion or siphoning off company funds by promoters, directors and key managerial persons.

“The forensic auditors are authorised to seek information from the company during the process of their assignment,” the SEBI said, directing the company to cooperate with the auditing company.

Brightcom response

The company, in a filing to the BSE, has said it had received SEBI’s communication in September 2021, informing it about the appointment of the forensic auditor.

“It was primarily concerning queries relating to ‘Impairment of Assets in 2019-20. The impairment charge, a non-cash charge, was taken by the company due to the Global Data Protection Regulation (GDPR) in Europe and its applicability worldwide,” it said.

“We have represented to SEBI that the said audit was unnecessary because several internet companies had to take such charges globally, owing to the GDPR norms,” it said.

However, the market regulator told us on February 25 that the audit would be necessary.

“Since September 2021, the company has extensively cooperated with the SEBI and the auditor, in this regard, by supplying volumes of data, including a break-up of the impaired assets,” it said.

The company said it was audited by EY for 40 per cent of its revenues, and “nearly 70 per cent of our revenues come from Israel and the US, two of the most regulated countries in the world.”