The
Securities and Exchange Board of India (Sebi) on Wednesday banned 12 persons or entities, including five foreign institutional investors (FIIs) or sub-accounts, from dealing in securities or instruments with Indian securities as underlying, for their alleged involvement in market manipulation using global depository receipts (GDRs).
Sebi has found prima facie that four sub-accounts of foreign investors were selling their GDRs converted into their underlying stocks of Indian firms through five Indian clients and as such were involved in market manipulation in six stocks.
In an ad interim ex-parte order, Prashant Saran, whole-time member of Sebi barred one FII, four sub-accounts and five intermediaries, one investment banker and one person from transacting in securities till further orders. The Sebi investigation pertained to the period beginning January 2009 to May 2010, and it said that the ex-parte order was necessitated by the need to protect the interests of retail investors. However, the banned entities were given 21 days time for filing their objections to the order, if any.
The GDRs of Indian companies involved in the racket include Asahi Infrastructure & Projects, IKF Technologies, Avon Corp, K Sera Sera, CAT Technologies and Maars Software International. In the light of the findings, Sebi has barred these firms from making any fresh issue of equity shares or alter their capital structure in any form.
Sebi overhauls takeover norms It was prima facie found that Arun Pancharia of India Focus Cardinal Fund, one of the four sub-accounts involved in the scam, was the king pin of the whole racket. Sebi has banned Pancharia and Pan Asia, which managed the GDRs of the six firms, from dealing in any securities defined in the Indian market.
It also prohibited other market intermediaries from dealing with these two persons or entities. "India Focus is a sub-account managed by him (Pancharia) and observed to be most active in converting GDRs managed by Pan Asia and selling them in Indian markets. Further, prima facie, Group (buyers) members acting as major counterparties to sell orders of India Focus are also connected to Arun Panchariya," Sebi said in the order.
The FII account of European American Investment Bank was named in the scam, for it has been identified as the facilitator for India Focus Cardinal Fund, the lone sub-account for which it was registered as an FII. The other sub-accounts involved were KII Ltd, Mavi Investment Fund and Sophia Growth. The Indian intermediaries who were involved in the process as counterparties or buyers included Alka India, Basmati Securities, SV Enterprises, JMP Securities and Oudh Finance & Investment.
Simultaneously, Sebi also directed the depositories to freeze the beneficial owner accounts of the FIIs and intermediaries involved in the scam. Indian retail investors have probably made losses by investing in these companies on account of an asymmetry of information with regard to cancellation of GDRs and prearrangement of trades between sub-accounts and group (of buyers), which denies them opportunity to trade on complete market information, Sebi said.
Courtesy: Mail Today
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