Market manipulation in units of Closed-end Annuity Fund Kolchuga managed by LLC UNIVER Management, Closed-end Mixed Fund Tekhnologia Rosta, Closed-end Equity Fund Universalnye Strategii, Closed-end Equity Fund Otraslevye Investitsii managed by CJSC Management Company EMERALD GROUP: established facts
The Bank of Russia detected multiple and lasting cases of manipulation, on MICEX, in the units of Closed-end Annuity Fund Kolchuga managed by LLC UNIVER Management, Closed-end Hybrid Fund Tekhnologia Rosta, Closed-end Equity Fund Universalnye Strategii, Closed-end Equity Fund Otraslevye Investitsii managed by CJSC Management Company EMERALD GROUP (further jointly referred to as the Units) between 4 July 2012 and 5 November 2015 (further referred to as the Period) by a number of LLC UNIVER Capital clients: LLC UNIVER Management, LLC Asset Management Agency Impuls, LLC Investment Company D C Capital, LLC Centrum Depository, LLC Custody Technology and LLC HeliosGroup (further referred to as the Clients).
Trading of the Units in the Period was irregular, with the proportion of cross trade between LLC UNIVER Capital and the Clients in the total trading amounts of each of the Units at
The bidding practices between LLC UNIVER Capital and the Clients (the same for each financial instrument) bear testament to prior agreement.
The resulting transactions, aiming to sustain the appropriate Unit price and traded value, recognised as capital by several professional securities market participants (including LLC UNIVER Capital, LLC Centrum Depository and LLC Investment Company D C Capital) failed to result in any substantial profit (or often resulted in a loss). However, they secured the appropriate value of the respective entity’s investment.
Moreover, found were diverse and multiple interrelations between LLC UNIVER Capital, CJSC Management Company EMERALD GROUP Clients, CJSC Management Company EMERALD GROUP, their staff, founders and beneficiaries.
In this way, the investigation established facts suggesting prior agreement was in place between LLC UNIVER Capital and the Clients on the execution of Unit transactions, resulting in substantial deviation in price and traded value in the trading of the Units on MICEX in the Period. These actions are qualified as Unit market manipulation under Article 5, Section 1.5 of Federal Law No.
Importantly, in the period the above transactions were being conducted, LLC UNIVER Capital was a market maker as regards trading of the Units. For this reason, its actions are covered by statutory exemptions as per Article 5, Section 3.3 of the Federal Law; their actions cannot therefore be recognised as market manipulation in and of itself.
The bidder’s behaviour in the course of transactions, consisting in the use of a market maker status for its own and its clients’ benefit, will be subject of a separate Bank of Russia investigation for compliance with fair trade practices.
Following the investigation, the Bank of Russia decided to revoke professional licences from LLC UNIVER Management and LLC Asset Management Agency Impuls (a professional securities market participant’s licence and investment / unit investment / non-governmental pension fund management licence respectively).
Furthermore, regulatory action is being considered against other individuals including executives who were involved in market manipulation.
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