Sebi bans 3 firms accused of GDR manipulation from security markets

Markets regulator Sebi has barred ABL Biotechnologies for at least five years from the securities market for manipulating issuance of global depository receipts (GDRs). Clifford Capital Partners and Kollenmareth Oomman Isaac are also banned for five years from the securities market, according to Sebi.

As per the order, Issac was the managing director of ABL at the time of the violation. The regulator also directed ABL to continue efforts to recover an outstanding sum of USD 6.64 million (about Rs 46 crore) from Clifford Capital Partners, the only subscriber of the company's GDRs.

Sebi had conducted an investigation into the issue of GDRs by ABL and observed that the firm had issued 8.2 lakh GDRs for USD 6.68 million on June 20, 2008. The investigation revealed that all the 8.2 lakh GDRs were subscribed by only one entity, Clifford Capital Partners.

The subscription amount for GDRs was paid by Clifford Capital Partners after securing a loan from Lisbon-based bank Banco Efisa. However, ABL had pledged the GDR proceeds to Banco bank against the loan given to Clifford Capital Partners for subscribing GDRs, Sebi said. "The GDR issue would not have been subscribed if ABL had not given such security towards the loan taken by Clifford," Sebi said in an order dated May 31.

By entering into such an arrangement and not disclosing the same to investors, the firm led investors to believe that its GDR issue was successful whereas the same was subscribed by only one entity, the regulator said.

Regarding Clifford Capital Partners, the regulator said that it had actively participated with ABL in the fraudulent scheme of issue of GDR. By indulging in such activities, all three entities violated the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) regulations, the Securities and Exchange Board of India (Sebi) said.

Accordingly, Sebi barred ABL from the securities market for five years from the date it brings back USD 6.64 million from Clifford Capital Partners to its bank account, while Issac and Clifford Capital Partners were banned for five years from the date of order.

(With inputs from agencies.)