Senate to review trading schemes

As the Securities and Exchange Commission takes on the task of implementing management reforms at the Philippine Stock Exchange, the Senate will look into possible changes in trading rules and regulations to rid the bourse of transactions that could be used for fraudulent or anomalous deals.

In a memorandum, the Senate committee on banks, currencies and financial institutions, which is investigating the stock scandal involving gaming firm BW Resources, said it would review a number of trading schemes such as private placements and lock-up of shares, share repurchase or buybacks, "done-thru" transactions, dummy accounts, multiple accounts, over-the-counter transactions and false or misleading disclosures.

The controversial PSE report on the spectacular, but highly irregular rise and fall of BW stocks last year traced the trading price manipulation mainly to a series of wash sales, wherein there is no beneficial change in ownership, but only to create the illusion that the stocks are much in demand, hence jacking up its price.

The PSE report, prepared by the Compliance and Surveillance Group of PSE vice president Ruben Almadro, has recommended that private placements and lock-up of shares, along with repurchase or buyback options be prohibited.

The report said a private placement is manipulative per se as it results in the withholding of shares, thus causing an artificial shortage while at the same time falsely showing activity in the market.

It added that with a repurchase agreement, a private placement may be construed as a form of wash sale.