SEC Compliance and Enforcement Department director Tomas Syquia said they will have to verify certain pertinent records such as minutes of meetings and phone calls to develop a possible case of insider trading against the three groups which he did not identify.
"We have to work on stages to firm up the case. Right now, these are mere suspicions with no definite findings yet," he said.
Syquia said they started to trace back the questionable deals in FLI shares at the Philippine Stock Exchange from November 2001 to early February this year and noticed that the three groups heavily bought and traded in the stock during the period.
Last Feb. 5, FLI disclosed to the exchange that it has issued P1.2 billion worth of convertible bonds to Reco Grandhomes Pte. Ltd., a company managed by GC Real Estate Pte. Ltd. of Singapore, a subsidiary of the government of Singapore Investment Corp. Ptd. Ltd. which already owns 500 million shares or about 12 percent of FLI.
The announcement took market players by surprise since aside from having the option of converting into common stocks at any time within five years, the conversion price was pegged at P.170 to P1.875 per share, way below the stock’s prevailing market price then of P2.38.
As a result, FLI shares steadily slid below the P2-mark as investors dumped the stocks; however, the issue price has steadily recovered since then.
FLI earlier explained that the lower-than-market conversion price it has pegged on the convertible bond issue was fairly valued since it was based on a predetermined formula, given the stock market conditions at the time of negotiations.
Negotiations with Reco started in mid-December 2001 when the stock market was still in a slump. With an original target closing date of Jan. 25, 2002, the parties then projected that share prices would hover at P1.72, the average for the last two trading weeks of December.
FLI said it made the disclosure within the required timeframe under PSE regulations. While pricing negotiations were held in December, the transactions could not be considered final until due diligence, legal documentation and other matters were agreed upon and that any premature disclosure may have derailed the deal.
FLI said the proceeds of the convertible bonds were used to partly pay and retire $100 million in company-guaranteed convertible bonds issued in 1996 by its wholly-owned foreign subsidiary FLI Capital (Cayman Islands) Ltd. and fell due on the first week of February 2002.
As a result, FLI said it has completely eliminated its foreign currency exposure and has significantly brought down its total borrowings from P8 billion to P3.5 billion. – Conrado Diaz Jr.