DBP official: No Market Manipulation, Just Rule Breaking!

Last weekend, I pointed  to the charge by the Philippine state owned entity the Commission on Audit that the state development bank, DBP engaged in 'wash sales'.  Such allegation, I used as an example of the likely ongoing market manipulations in Philippine financial markets.

A DBP official dispute such claims (from ABS-CBN)

"There was no market manipulation, we sold and bought at the same price," DBP President Gil Buenaventura said in a phone interview.

He said the "strategy" was to sell the bonds, which were being held in the bank's trading account, before they lost more value. Then the bank bought them back and place them in the bank's so-called hold-till-maturity account, where it is bond interest payments that are recognized, not their value. All the transactions were done by Metrobank's First Metro Investment Corp. unit.

Buenaventura admitted these may seem suspicious and the traders may have broken some bank and Bangko Sentral ng Pilipinas rules in the process.

Well that's his opinion. 

Nonetheless the admission of having to infringe on rules reveals that the bank has engaged in market hanky-panky, regardless of definitions

Of course, like all personality based politics, the bank's reaction has been to file "administrative charges against its treasurer and two other Treasury employees". 

Yet without media's exposure, this kind of things will just go on.

Anyway when the sensation fades, I expect a whitewash on this

However based on APEC Competition Policy & Law Database on price manipulation regulations in the Philippines, 'wash sale' is defined by them as

A wash sale occurs when a customer enters a purchase order and a sale order at the same time through the same broker/dealer. The ownership of the stock does not change. This would normally be done to create the appearance of activity in a security. See, U.S. v. Minuse, 114 F. d. 36, 38 (1940).

Additionally, the Philippine Security and Exchange Commission (SEC) has a previous record of indicting "wash sale" as criminal activity. 

So in my opinion, the claim "we sold and bought at the same price" that had  been done by the same broker, unless my comprehension is wrong, looks very similar to the description of wash sale as having entered "a purchase order and a sale order at the same time through the same broker/dealer. The ownership of the stock does not change."

And since wash sale according to the SEC falls under Section 24 of the SEC Regulation Code along with marking the close, and since the title of Section 24 states: "Manipulation of Security Prices; Devices and Practices" then this likely means that based on SEC's classification--the self described activity by the state bank--would seem to fall into category of "manipulation"

But since this is a legal issue I lay my hands off.