Published On: Thu, Nov 15th, 2012

Colombia´s Interbolsa executives to face prosecution?

Executives at Colombia´s top brokers Interbolsa face possible criminal charges as the fallout from the firm´s dramatic collapse last week continues.

Finance Minister Mauricio Cardenas has ordered an inquest into whether the company evaded US$50m in taxes in its dealings with a capital fund in the Caribbean offshore haven of Curacao.

Director of Colombia’s tax agency, Juan Ricardo Ortega, said that such  “worrying behaviour”  is now  ”subject to investigation”.

Moreover, Attorney General Eduardo Montealegre, announced on Wednesday that a criminal investigation into the events leading to Interbolsa´s sudden fall from grace will begin immediately.

The AG will look at four cases of potential criminal wrong-doing: A dereliction of the brokers´ duty to inform investors of the firm´s troubles, violation of conflict of interest rules, manipulation of share prices, and suspect practices surrounding corporate buy-outs.

On Tuesday, Simon Gaviria, Leader of the Liberal Party, and President of the Colombian House of Representatives, added fuel to the fire claiming execs´ “unmonitored” behaviour was on the border line of illegality.

Interbolsa´s liquidation will take around four months to complete while the extent of the firm´s losses remains unknown.

The 18,000 Investors whose frozen assets total around US$3.59bn, will, from next Monday, begin to see their money returned according to remarks made today by the settlement agent.

Market activity since last week´s collapse has been restrained as traders remain on alert for any signs of spillover to other financial institutions. Though the early signs are that this is an isolated case, the value of the Colombian peso has fallen in the past week by 0.1%.

Speaking to Bloomberg, an analyst at Banco de Bogota claimed that some were “seeking refuge” by buying up dollars, with this and the low trading volume suggesting nervousness among investors. Despite this, the bank also claimed that the “government´s actions have helped calm fears”.

The Colombian government, appearing to have learnt from the mistakes of the US financial crisis in 2008, acted swiftly to prevent a Lehman Brothers-style contagion.

Doubts remain, however, about the robustness of a regulatory framework that allowed Interbolsa´s traders to drive the company to the wall.

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