Bapepam needs more time on insider trading probe
Bapepam needs more time on insider trading probe
Dadan Wijaksana, The Jakarta Post, Jakarta
The Capital Market Supervisory Agency (Bapepam) said on Tuesday
it was unable yet to prove the alleged involvement of U.S.
financial firm Merrill Lynch in insider trading during the sale
of government shares in state-owned telecommunications firm PT
Indosat in May.
Bapepam Chairman Herwidayatmo said that the capital market
watchdog would need more time to carry out further investigations
to determine whether the giant financial firm had committed the
illegal practice.
"The investigation on possible insider trading, including
Merrill Lynch, will be continued and if proven there's an insider
trading element, it will be taken to court," Herwidayatmo was
quoted by detik.com as saying.
Nevertheless, Bapepam has sanctioned four officials of small-
time securities firm PT Nusantara Capital for selling Indosat's
rights issue plan to investors at a time when the government was
trying to sell its shares in the international call operator.
The rights issue offer had scared investors who feared that their
share ownership in Indosat would be diluted, leading to a massive
sell-off of Indosat shares. This has been seen as one reason for
the poor result in the Indosat divestment.
The penalties imposed on Nusantara officials range from Rp 50
million (around US$5,800) to Rp 100 million in fines. The
officials were supposed to help sell the government shares in
Indosat, not marketing the rights issue plan.
If they fail to pay the fines within 60 days, the four will be
barred from making transactions on the Jakarta Stock Exchange for
between one year and two years.
Bapepam started the investigation on May 23 following
accusations from State Minister of State Enterprises Laksamana
Sukardi that Merrill Lynch had taken part in the massive Indosat
share sell-off.
Laksamana accused the company of having a conflict of interest
as Merrill Lynch was also Indosat's financial advisor for the
planned rights issue, expected to take place later. Laksamana
accused Merrill Lynch of carrying out insider trading.
The sell-off by Merrill Lynch, which took place prior to the
government's plan to divest an 11.32 percent stake in Indosat via
a private placement, helped drive the share price of Indosat down
by nearly 5 percent.
The Jakarta Stock Exchange then suspended over-the-counter
trading in the shares, pending clarification from the government
on the rights issue plan.
Data from Bloomberg showed that Merrill Lynch was among big
sellers of Indosat shares at the time, with 4.14 million shares
sold.
This was followed by ABN Amro Asia Securities, with 1.30
million shares, JP Morgan Securities (1.22 million), Vickers
Ballas (753,000), Kim Eng Securities (523,000).
Merrill Lynch, which denied any wrongdoing, was not involved
in the private placement, which was jointly carried out by Credit
Suisse First Boston and state-owned Danareksa Securities.
All this led to disappointment as the government could only
sell an 8.1 percent stake in Indosat at a price of Rp 12,000 per
share, lower than the price level of Rp 12,600 before the trading
suspension.
The government only managed to raise some Rp 1 trillion in
proceeds.
That was the first sale under the government 2002
privatization program, the proceeds of which will be partly used
to help plug this year's state budget deficit.
The state budget has set a target of raising Rp 6.5 trillion
from privatization program this year.
The government plans to sell a 45 percent stake in Indosat
this year as part of the privatization program.
The sale of the 83.5 million shares reduced the government's
holding in Indosat from 65 percent to 56.9 percent.