Facts of manipulation in market for JSC National Capital’s bonds established

The Bank of Russia has established facts of market manipulation at exchange trading of JSC National Capital’s bonds of the 03 and BO-06 series (hereinafter collectively, the Bonds) in 2015–2016.

In 2015–2016, the markets for the Bonds were formed as a result of transactions conducted by a limited group of related parties — clients receiving brokerage services provided by KIT Finance (JSC). These transactions were characterised by high coordination (highly synchronous matched orders with identical parameters issued by counterparties) in the anonymous trading mode in the market for illiquid securities, and in a number of cases they caused significant deviations in the price and/or trading volumes of the Bonds and created the conditions sufficient for the exchange to calculate the ADMITTEDQUOTE indicator.

The investigation has established that the transactions entailing significant deviations in the trading parameters of the Bonds were concluded by Joint-Stock Company TRANSFINGROUP and TRINFICO Asset Management Company (JSC) using the resources of a non-governmental pension fund, by RWM Capital Asset Management (CJSC) using the resources of unit investment funds, and by KIT Finance Trade (LLC) and JSC TFK-Finance using their equity funds, that acted in collusion through the mediation of KIT Finance (JSC).

An employee of KIT Finance (JSC) assisted the above entities in searching counterparties, as a result of which the above entities conducted transactions, including transactions in the main trading mode of the exchange. Moreover, in a number of cases, an employee of KIT Finance (JSC) acted on behalf of one of the parties in such transactions, issuing orders on behalf of KIT Finance Trade (LLC) based on a power of attorney.

Pursuant to Clause 2 Part 1 Article 5 of Federal Law No. 224-FZ, dated 27 July 2010, ‘On Countering the Misuse of Insider Information and Market Manipulation and Amending Certain Laws of the Russian Federation’ (hereinafter, the Federal Law), the actions of Joint-Stock Company TRANSFINGROUP, RWM Capital Asset Management (CJSC), KIT Finance Trade (LLC), JSC TFK-Finance, and TRINFICO Asset Management Company (JSC) with the Bonds qualify as market manipulation, which is a violation of the prohibition stipulated by Part 2 Article 6 of the Federal Law.

The Bank of Russia has sent orders to desist from similar violations in the future to Joint-Stock Company TRANSFINGROUP, RWM Capital Asset Management (CJSC), KIT Finance Trade (LLC), JSC TFK-Finance, TRINFICO Asset Management Company (JSC), Vadim Dorofeev, Farit Zakirov, Denis Markov, Alexey Volodarsky, Stanislav Ponomarev, Andrey Belousov, and Dmitry Konovalov.

Taking into account that employees of KIT Finance (JSC) were involved in the violations committed by clients of KIT Finance (JSC) and established by the Bank of Russia, the regulator has also recommended that KIT Finance (JSC) implements measures to enhance the efficiency of internal control over compliance with the Federal Law and related regulations.

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