Bapepam drops inquiry into BCA share

Bapepam drops inquiry into BCA share

Berni K. Moestafa, The Jakarta Post, Jakarta

The Capital Market Supervisory Agency (Bapepam) has
unexpectedly dropped an investigation into suspected manipulation
of PT Bank Central Asia (BCA) share prices, citing that it lacked
evidence to justify prosecution.

Bapepam chairman Herwidayatmo said on Monday that although BCA
trading patterns looked suspicious, the agency had found no proof
of improper conduct.

"When looking at BCA's trading pattern, it looks quite
apparent that something was fishy," he said in a press
conference.

Bapepam's announcement ended a two-month probe of the case,
which surfaced at a time when the government was struggling to
sell a 40 percent stake in BCA, the country's largest retail
bank.

The agency initially suspected that the price of BCA shares
had been manipulated to a certain price level in the trading
period between May and mid-July.

Between May 15 and June 12, several securities companies had
dominated the purchasing of BCA shares, causing its price to
surge.

However, from June 13 until June 29, the same companies
dominated the selling of BCA shares, a move that drove down share
prices.

Investors manipulating BCA share prices would have benefited
from the capital gain achieved through buying cheap and selling
high.

Bapepam's investigation included the state pension fund
company PT Jamsostek, PT Lippo Investment, and state securities
firms PT Danareksa Securities and PT Bahana Securities.

Herwidayatmo said that, although the four firms had suspicious
trading patterns, transaction volumes were too small to profit
from.

"If compared to the entire volume of transactions by each
respective company, the percentage of (suspicious) transactions
is insignificant," he explained.

He added that such transactions did not fall under the
definition of share manipulation as defined by law.

Parties found guilty of share price manipulation could face
penalties of up to Rp 15 billion (about US$1.54 million) and jail
terms of up to 10 years under Article 91 of Law No 8/1995 on the
capital market.

According to Herwidayatmo, BCA's share prices were driven by
news of the government's plan to divest its stake in the bank.

In early June, the Indonesian Bank Restructuring Agency
(IBRA), which is in charge of the sale, said foreign investors
expressed interest in the bank.

BCA share prices began to climb until the end of June, when a
sudden sell-off by securities firms led to a sharp drop in its
price. Herwidayatmo gave no explanation as to why the shares
fell.

The sale of BCA is part of the government's economic reform
agreement with the International Monetary Fund (IMF).

The government divested the first 22.5 percent stake in BCA
through an initial public offering in May last year.

IBRA sold a 10 percent stake through a secondary public
offering last July. Another 51 percent is slated for sale under a
private placement scheme sometime this year.

Danareksa was also acting as the lead underwriter for the
secondary public offering. The state securities firm was later
also charged with insider trading.

The insider trading charges were leveled against Danareksa for
its role in dumping the shares ahead of the secondary offering
date, when the price was around Rp 1,000.

Based on Danareksa's recommendation, IBRA had agreed to an
offering price of Rp 900, but Herwidayatmo argued that here too,
Bapepam found no evidence to support charges of insider trading.