On identifying the facts of market manipulation
The Bank of Russia has established the fact of recurrent manipulation with common stock markets of the United Reserve Funds Assets Management Corporation (URF Assets Management Corp.) and share markets of the Interval Unit Investment Hybrid Fund ‘Tretiy Reservny’ at MICEX SE trades in 2011 and 2012.
The check has established that the stock markets and share markets of these companies were created artificially. As for deals with the stocks of URF Assets Management Corp., limited liability company FinECo (FinECo) and its customers (individuals and legal entities) directly related with each other, the issuer, the management company Interval Unit Investment Hybrid Fund ‘Tretiy Reservny’ and the professional participant in the securities market accounted for 96.78% of the trades. As for deals with the shares of Interval Unit Investment Hybrid Fund ‘Tretiy Reservny’, FinECo and its customers accounted for 99.71% of the trades.
Trade organiser and FinECo entered into an agreement on rendering market-maker services on stocks and shares of the above-mentioned companies. The bids under the agreement on market-maker functions which served the basis of subsequent deals with financial instruments, were submitted not only by FinECo, but also by its 32 customers. Under the legislation of the Russian Federation on countering misuse of insider information and market manipulation, activities aimed to support prices, demand, supply or financial instrument trade volumes and performed in the framework of the agreement with the trade organiser, shall not be classified as market manipulation.
At the same time, deals with the stocks of URF Assets Management Corp. and with the shares of Interval Unit Investment Hybrid Fund ‘Tretiy Reservny’ concluded by FinECo for its own benefit and for the customers’ benefit outside the scope of the mentioned agreements, accounted for 90.8% of the trades in the stocks of URF Assets Management Corp. and for 99.6% of the trades in the shares of Interval Unit Investment Hybrid Fund ‘Tretiy Reservny’.
Manipulation of stock and share markets was performed by the customers of FinECo, Russian and foreign legal entities and individuals. These individuals held various posts in URF Assets Management Corp., which managed Interval Unit Investment Hybrid Fund ‘Tretiy Reservny’, and also in FinECo, professional participant in the securities market, which was involved in the market manipulation. They also controlled legal entities, including nonresidents, which manipulated markets of financial instruments.
Thus, prices on financial instruments at MICEX SE trades were formed by non-market means. These prices, and also other trade parameters (volume, demand and supply), were intentionally supported by interested related parties. In view of the above, the Bank of Russia believes that market prices on the stocks of URF Assets Management Corp. and on the shares of Interval Unit Investment Hybrid Fund ‘Tretiy Reservny’ (acknowledged quotes) are not fair and, as such, cannot reflect the real cost of these instruments.
Market manipulation activities constitute a grave violation of the requirements of the RF legislation. The Bank of Russia took a decision to cancel the licence of professional securities market participant authorized to engage in brokerage, issued to Limited Liability Company FinECo, and to cancel qualification certificates of financial market specialists issued to O. Yuminov, I. Orlov and A. Yakovlev, who, during the market manipulation period, hold posts of the General Director at URF Assets Management Corp., the General Director at FinECo and the controller at FinECo, respectively.
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