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.