GDR issue: Sebi bans Morepen Lab from capital mkts for 1-yr

Regulator Sebi on Tuesday barred Morepen Laboratories from the capital market for one year for making misleading disclosure about the issuance of global depository receipts (GDRs).

The regulator noticed some arrangement being perpetrated by certain entities in respect of issuance of GDRs and therefore conducted an investigation into such issues of various companies, including Morepen Laboratories, made in March 2003.

The probe found that GDRs of Morepen were subscribed by two entities -- Solsec Company and Seviron Company -- both incorporated in the British Virgin Islands. These two entities had obtained loan through credit agreement from Lisbon-based Banco Efisa, S.F.E., S.A.

Further, Morepen had secured the loan obtained by Solsec and Seviron from Banco by pledging the GDR proceeds through 'Account Charge' agreement with Banco.

Sebi said that Morepen did not inform BSE about the execution of account Charge agreement entered in March 2003 with Banco which acted as a security for the loans availed by the subscribers and also that the GDR issue was subscribed by only two entities -- Solsec and Seviron.

Instead, Morepen made a misleading disclosure to the BSE that the issue of GDRs was successfully subscribed, it added.

In its 47-page order, the regulator said that Morepen made "GDR issue with an arrangement that it pledged the GDR proceeds for the loans availed by the subscribers for subscribing to the GDR issue of Noticee no 1 (Morepen) and made false and misleading disclosures."