PSE set to turn over RPC probe results to SEC

The Philippine Stock Exchange is ready to turn over to the Securities and Exchange Commission its records on the probe of trading anomalies in aluminum maker Reynolds Philippines Corp. by next week, PSE president Ramon T. Garcia said.

The investigation wraps up almost four months of work initiated by the PSE’s compliance and surveillance group (CSG) which documented price manipulation schemes in RPC deals from mid-May to early July this year.

Garcia said it will be up to the SEC to determine if sanctions will be imposed on RPC if their findings will be validated. Meanwhile, the PSE’s business conduct and ethics committee (BCEC) will summon the member-brokers involved in the anomalous transactions to explain their sides.

The six brokers earlier mentioned as having participated in the suspicious deals are Guild Securities, DBP-Daiwa Securities, First Orient Securities, GK Goh Securities, Mark Securities and Magnum Securities.

"I think these violations are not grave enough to merit suspension or expulsion from the exchange," Garcia said. In the case of RPC, monetary penalties can likewise be imposed, with delisting as the last option although the PSE had frowned on such a move.

Under the new Securities Regulation Code, companies found inviolation of trading rules and regulations can avail of a settlement scheme with the SEC.

The CSG report indicated that during the specified period, RPC officials with the collusion of the brokers, were engaged in kiting and wash sales. At its height, the price of PRC stocks soared to as high as 99 centavos, figuring prominently along with the blue chip stocks despite its relatively low market capitalization.

Upon its trading suspension (on a separate violation, the non-submission of financial reports) last Aug. 4, RPC shares closed at barely 10 centavos or a huge 90-percent drop.

In finance lingo, kiting is the practice PSE set of issuing checks in excess of the signer’s bank balance with the expectation of making deposits in time to cover the checks. In the stock market, this means allowing the temporary funding or bridge financing through the advance payment of selling transactions.

A wash sale, on the other hand, pertains to transactions that involve the same buyer and seller, hence no beneficial change in ownership but creates the illusion of active trading in the said shares.