The Securities & Exchange Commission has forwarded its extensive probe of the affairs under which Bank of Cyprus sold 39 mln shares on the Athens Stock Exchange to the Attorney General for the imposition of punitive measures against those who violated securities laws.
The SEC conducted a thorough investigation of the way BOC sold 39 mln shares in 2000 and then listed the shares on the ASE, raising some CYP 215 mln, at least on the books.
The SEC investigation found that BOC officials violated securities laws, mostly referring to share price manipulation and making false statements regarding the success of the issue, at a time when BOC officials were lending money to prime clients, who were then given guarantees to purchase the BOC shares in Greece.
Not only did the BOC violate the Cyprus laws, but the group also violated scores of securities laws in Greece, since first it offered a guarantee to people getting the loans that its price would not decline below a specific level. By portraying the picture that its issue had been successful, it made bold statements which encouraged more people to buy its shares or refrain from selling, when it was obvious that its issue in Greece had been a flop.
The SEC said that since it does not have the authority to impose penalties for violation of the Article 67 and 68 of the Law, which are a criminal offence, it forwarded its extensive probe, which also includes testimony by those who borrowed and subscribed to the shares to the Attorney General.
The case came to the fore after the Bank started pressuring the borrowers to settle their commitments to the bank, something which the borrowers refused to do, citing the guarantees offered to them regarding the price performance. Since the listing, the Bank’s share price has declined from the CYP 6 level to the current CYP 1.8 level. Many of the borrowers, mostly wealthy and well connected persons have refused to pay and cooperated fully with the SEC and gave valuable testimony.
Earlier the bank came under strong criticism from the Central Bank for its decision to writeoff CYP 148 mln in bad debts, mostly related to the issue in Greece in March.
Unconfirmed reports suggest that the SEC has in its possession evidence gathered from CISCO, the Group’s investment banking division which shows that BOC officials were actually behind the share price manipulation scheme.
