Sebi bans GV Films, 5 others from securities markets for GDR manipulation

Market regulator Sebi Tuesday barred GV Films Ltd for five years from the securities market for manipulating the issuance of global depository receipts (GDRs).

Besides, the regulator has also barred Mahadevan Ganesh, A Venkatramani, R Gopalan, V Subramonian for two years, while P Raghuraman was banned for five years as per Sebi's order.

According to the order, Raghuraman was a whole-time director in the company, while Gopalan, Ganesh and Venkatramani were non executive directors and Subramonian was president-corporate affairs of the firm at the time of the violation.

Sebi had conducted an investigation in issuance of GDRs by GV Films and observed that the firm had issued 6.4 million GDRs for USD 40 million on April 27, 2007.

All the 6.4 million GDRs were subscribed by only one entity, Whiteview Trading Corporation, the regulator observed.

The subscription amount for GDRs was paid by Whiteview after securing a loan from bank Banco Efisa S.A.

However, GV Films had pledged the GDR proceeds to Banco bank against the loan given to Whiteview for subscribing GDRs, Sebi said.

"The GDR issue would not have been subscribed if GV had not given such a security against the loan taken by Whiteview," the regulator noted.

Sebi further noted that by entering into such an arrangement, the entities led the investors in India to believe that the issuer company GV Films has got a good reputation in terms of investment potential because of which foreign investors successfully subscribed to its GDR, whereas in reality, the GDRs were subscribed by Whiteview with the help of the GV itself.

Regarding the officials, the regulator said that they facilitated the execution of such arrangement by passing a suitable board resolution and thus were liable for the act.

The acts of the firm and the officials were violative of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices), Sebi said, and accordingly imposed a ban on them.