On establishing facts of bond markets manipulation
The Bank of Russia has established manipulation of bond markets during organised trading under the scheme aiming to illegally withdraw pension savings from INPF AKVILON OJSC managed by TRINFICO Asset Management JSC.
The Bank of Russia’s investigation has established operations in the bond markets of 68 issuers allegedly conducted in collusion during the period from 10 March 2015 through 22 December 2015 (hereinafter, the Period) by KIT Finance Trade (LLC) and TRINFICO Asset Management JSC, acting as the trust manager of pension savings of INPF AKVILON OJSC (hereinafter, the Fund).
The bond transactions were conducted between the said persons in the main trading mode on the Moscow Exchange brokered by professional securities market participants KIT Finance (JSC) and CJSC TRINFICO on the basis of anonymous buy orders. It was established that during the Period the counterparties recurrently employed a well-coordinated scheme aimed at illegal funds withdrawal from the Fund.
Under this scheme, operations to buy/sell bonds were conducted, as a result of which KIT Finance Trade (LLC) systemically derived income from price differences as the management company concluded transactions unprofitable for the Fund.
Transactions with the bonds of 13 issuers, which have caused significant deviations in the price and trading volume, are qualified as market manipulation under Clause 2, Part 1, Article 5 of Federal Law No.
The Bank of Russia estimates that the total income of KIT Finance Trade (LLC) derived from the said operations with TRINFICO Asset Management JSC during the Period reached at least 57 million rubles, including 6 million rubles from the operations qualified as market manipulation. Due to the systemic sale of bonds at prices below the purchase price, the Fund may in turn sustain comparable losses.
The trade behaviour patterns of TRINFICO Asset Management JSC in the course of the management of the Fund’s assets when conducting operations with other counterparties differed from the said operations with KIT Finance Trade (LLC) (there were no scheme actions). As a result, during the same Period of the management of the Fund, the total financial result of operations with other counterparties, excluding KIT Finance Trade (LLC), was positive.
The Bank of Russia established that operations with the bonds under investigation had been conducted by Vadim G. Dorofeev, the head of the Division of Broker Operations at KIT Finance (JSC) and another employee of the said Division, who acted on the instruction of V.G. Dorofeev. The said employees of the broker acted on the basis of the power of attorney when conducting operations on behalf of KIT Finance Trade (LLC).
On the part of TRINFICO Asset Management JSC, instructions to conduct operations with bonds for the account of the Fund’s pension savings were submitted by Farit Kh. Zakirov, who headed the pension savings management division, UIF and NPF asset management at TRINFICO Asset Management JSC and the sales unit (broker services) at CJSC TRINFICO.
During the Period, F.Kh. Zakirov was also Chairman of the Investment Committee of TRINFICO Asset Management JSC. As proposed by F.Kh. Zakirov, this body made decisions to reduce the share of bonds in the Fund’s portfolio and to establish stop-loss limits on the Fund’s bonds. Being in charge of controlling limits and closing positions, F.Kh. Zakirov performed bond operations which were loss-making for the Fund.
The Bank of Russia decided to cancel the qualification certificates of financial market specialists issued to F.Kh. Zakirov and V.G. Dorofeev. Additionally, the Bank of Russia is conducting the assessment of activity of TRINFICO Asset Management JSC.
The materials of the investigation have been submitted to law enforcement authorities.
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