Regulation of Securities Market and Exchange Board of India (SEBI) on Wednesday banned seven companies to issue shares and securities.

It is also prohibited 10 other units, including some foreign institutional investors (FIIs) and sub-accounts of securities transactions for allegedly manipulating the markets through the issuance of global depository receipts (GDR).

The capital market regulator has also referred the matter to the Directorate of application (ED) because it has no direct powers to investigate suspected money laundering.

According to Sebi, Asahi and infrastructure projects Ltd IKF Technologies Ltd, Avon Corp Ltd, K Sera Sera Ltd CAT Technologies Ltd, Maars Software International Ltd. and Calibration Refineries Ltd has issued large amounts of GDR for the IIE and sub-accounts through the initial subscribers between 2007 and 2009.

The GDRs were issued at a premium especially at the prices prevailing in the market for its underlying shares in India, but later were converted into shares through a one group against the five states of India, leading to a loss to retail investors on behalf of a sudden rise in traded and falling stock prices.

Foreign investors, including Cardinal India Focus Fund, Ltd. KII MAVI investment, the growth of Sophia (part of Somerset India Fund), European, American Investment Bank AG and counter-parties, including Basmati Securities SA . Ltd, Oudh Finance & Investment soldier. Ltd Alka India Ltd, SV, and JMP Securities Pvt. Ltd is barred from domestic trading.

Have been found to violate certain sections of Industry and regulations involved in unfair trade practices.

Certificate of deposit is a payment instrument issued abroad, often in less regulated markets such as Luxembourg, the representative of the domestic underlying shares, making it easier for foreign investors to take exposure in the name of the target company without moving money through borders.

When the GDR subscribers convert into shares in the Indian market, there is a sudden increase in supply of shares equal to the listing and trading of additional shares, after a follow-on public offer (FPO) or qualified institutional placement (QIP) with a difference, if QIP FPOs and local investors are aware of the new offer of shares in the market.

According to Sebi, investors were willing to buy shares of seven companies, assuming that their prospects to be good because of the large holdings of FII and its sub-accounts. Through the negotiation between national and foreign parties against, seen liquid and prices were inflated. When foreign investors out, many of the GDRs were converted into shares, resulting in a surge of publicly traded, and declining stock prices, causing losses for retail investors.

SEBI has said that the signing escapes from the DDR authorities regulatory radar, since the disclosure of the GDR holders may be protected by military secrecy laws of foreign jurisdictions. In addition, the jurisdictions in which money laundering standards are not strong, companies can serve as a conduit for those who want to wash their money to people to join the RPG.

In the second stage, investors sell these in the Indian market, where liquidity is there, and that the sale is discharged through legitimate when the company will benefit with the huge growth in market capitalization.

According to data from Bloomberg, there were 457 lists GDR by Indian companies abroad since 1993.

“They (SEBI), seem to detect this via the control system. As long as India follow-up mechanism is sufficient to detect such episodes, I do not think that there is no need to change the regulatory system,” said Prof. Jayanthi R . Varma and Indian Institute of Management, Ahmedabad.

The currency in July, had reported that Indian financial regulators plan to impose strict conditions for Indian companies issuing GDRs on the concerns of the reputational risks and possible market manipulation by companies issuing GDR.

“We found that there are several companies in India have increased their capital by issuing GDR trash,” a government official quoted by the report of July.

The new legislation seeks to ensure that companies meet only minimum standards are allowed to issue GDRs.

For SEBI has said that the structure of the GDR, its trading partners, and local regulations in the countries concerned, it is not possible to determine the identity of the owners of the GDR not only the identity of the original investors in the company.

The new regulations may mandate issuers to disclose the names of the ultimate beneficiaries of the GDR holdings, according to another government official quoted in the report of the Currency in July.