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Sebi bars 7 cos from issuing shares or convertibles
Sebi has barred bars 7 companies from issuing any shares or convertible instruments, having found evidence of price manipulation by these companies, reports Sajeet Manghat of CNBC-TV18.
Sebi has barred seven companies from issuing any shares or convertible instruments, having found evidence of price manipulation by these companies, reports Sajeet Manghat of CNBC-TV18.
The modus operandi has been that the companies issue shares in the form of Global Depository Receipts (GDRs) and those are later converted into domestic shares. The GDRs are then cancelled, and the Indian entities go and sell them in the market. The scam stems from the fact that there was no transparency as to how many shares get converted from GDRs to shares, or shares to GDRs, which was used as means to depress prices or manipulate prices by the named companies.
These illiquid and low price companies continue to exist and trade at the market. There was sudden activity noticed on their counters which ticked off the market regulator
Sebi sees a prima-facie violation of FEMA regulations in the conversion of GDRs to shares and vice-versa. It has thus passed an order barring these entities from capital markets, including an FII, four FII sub-accounts and five domestic participants or intermediaries who have undertaken such transaction. That apart, the seven companies have been asked not to issue any shares or convertible instruments so as to alter the capital structure of the company.
However, since the FEMA regulations fall outside the purview of Sebi, the market regulator has directed the Enforcement Directorate to take up the issue further.
