sebi:WTM/PS/ISD/63/01/2012

SEBI · SEBI · 2009-01-01 · Prashant Saran, Whole Time Member

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Modified the ad interim ex-parte Order dated September 21, 2011 to allow Mavi Investment Fund Limited to sell securities held in its demat accounts, with sale proceeds to be deposited in a bank fixed deposit subject to SEBI's prior permission for withdrawal or utilization.

Provisions invoked

• s. 19

Parties

• Mavi Investment Fund Limited

Holding

The interim directions issued against Mavi Investment Fund Limited by the Order dated September 21, 2011 were not vacated, but were modified to permit Mavi to sell the securities held in its demat accounts, with sale proceeds deposited in a fixed deposit and withdrawals subject to SEBI's prior permission.

Full text

Page 2 of 7 market transactions in certain scrips, namely, IKF Technologies Limited, Avon Corporation Limited, CAT Technologies Limited, Asahi Infrastructure and Projects Limited and K Sera Sera Limited and a revelation in the preliminary examination that Foreign Institutional Investors (hereinafter referred to as FIIs),namely, India Focus Cardinal Fund (India Focus), KII Limited (KII), Mavi and Sophia Growth (Spohia), were converting the Global Depository Receipts (hereinafter referred to as GDRs) underlying the shares of the aforesaid companies held by them into equity shares to sell in the Indian market and that most cancellations happened within a short period of time of their issue and on noticing that a few entities were repeatedly appearing as counterparties to the 33% to 75% of those shares sold by FIIs in the scrips, had conducted an examination into the same. The prima facie findings of the said examination pointed out to the various aspects of the GDR issues like the large size of the issue vis-à-vis the existing size of the issuing company, unimpressive financials of the company, common initial investors, high proportion of cancellation of GDRs repeatedly by a set of FII/Sub-Accounts, sale in Indian stock exchanges and a major portion being bought by a constant group of clients, the trading amongst the said clients and subsequent off-loading by them. The preliminary

Page 3 of 7 Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995, as mentioned therein.

Page 4 of 7 Maars were sold at `4.05/`4.10 per share as compared to the purchase price of `4.96/share. According to it, as the Indian markets were showing positive upward movement in general by August-September 2009, Mavi decided to sell the shares of Maars to minimize losses and its trades were routine and part of its day to day business. It was the submission that on September 18, 2009, Mavi placed two sell orders of 6,50,000 shares each through two stock brokers at 14:51:54 and 14:53:54 respectively and that the orders were placed telephonically. According to Mavi, the said trades were not synchronised in nature and there was a time difference of six minutes and twenty four minutes between the buy and sell orders. Similarly, for the trades executed on September 22, 2009, Mavi placed two Sell Orders of 6,50,000 shares each through two stock brokers –one Sell Order was placed at 13:41:54 and second Sell Order was placed at 13:43:12 and there were huge time difference between the buy and sell orders. It was stated that the issue size of GDRs of Maars was not disproportionate to the pre-GDR capital of Maars and that it held on to the shares of Maars for twenty months before selling. It was further submitted that Mavi is not owned and controlled by Mr. Arun Panchariya and that it has no connection or relationship with him or others. In view of the above

Source: SecMarx — sebi:WTM/PS/ISD/63/01/2012. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.