The Securities and Exchange Commission (CySEC) has fined German Commerzbank €650,000 for market manipulation in connection with the now defunct Laiki Bank’s (CPB) activities and role in the run up to the financial crisis and subsequent bail-in of the Cyprus banking sector in 2013.
CySEC said on Friday it had completed its investigation into what it called as “historical market manipulation” that occurred between Commerzbank AG and Cyprus Popular Bank (CPB).
The case was brought to the attention of CySEC by Akel MP Irene Charalambides and examined a possible violation of Article 19 of the Insider Dealing and Market Manipulation (Market Abuse) Law for the period between January 1, 2008 and March 15, 2013.
It said it found that CPB invested into two structured products issued by Commerzbank AG in February 2008. The composition of the underlying portfolio of the structured product was dynamic and was determined by the person appointed index sponsor.
Greek Marfin Egnatia Bank SA (a subsidiary of CPB) was initially set as the index sponsor. However, because of a cross-border merger between Marfin and CPB, CPB became the index sponsor as of March 2011. “This created a clear potential conflict of interest,” CySEC said.
It also found that CPB gave orders to Commerzbank’s London branch through a specific person for the acquisition of its own shares, specifying the price, and in some cases the details of the order submission to the Athens Stock Exchange. Commerzbank transmitted the orders for execution to a subsidiary of CPB, namely the Investment Bank of Greece SA (IBG), per the CPB’s instructions.
Information on the orders and execution placed to the Athens Stock Exchange was communicated by IBG to Commerzbank and its London branch was informing CPB accordingly.
“CySEC considers the placing of the orders to the Athens Stock Exchange as giving the market misleading information in relation to the CPB shares. Orders did not correspond to real market demand, but to false demand created by the issuer of the shares,” it said.
It added that Commerzbank and CPB “acted in concert to manipulate the market in relation to CPB’s shares” on several dates between March and May 2011.
CySEC said it decided to fine the German bank €650,000 “taking into consideration that more than eight years have elapsed since the time of the violation, as a mitigating factor.”
In the case of CPB, CySEC decided not to impose a fine considering that it is under resolution and the imposition of a fine would further burden the financial position of its depositors, bond holders and shareholders.
Further details of CySEC’s decision may be found here.