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. Last Updated: 07/27/2016

Bank Ruled Against in Gazprom Share Sale




The Federal Securities Commission ruled Friday that a company affiliated with investment bank Deutsche Morgan Grenfell had illegally acquired 2 million shares in Gazprom after the bank issued derivatives of the natural gas monopoly.


However, commission officials said they were satisfied that the remaining 121 million shares out of the disputed 123 million shares acquired by the company were in line with the Russian securities law.


The dispute is over the time of share purchase.


A May 1997 presidential decree bans foreigners from buying locally traded Gazprom shares. Gazprom wrote to the commission in April this year that Deutsche Morgan Grenfell, or DMG, was issuing derivatives -- financial instruments backed by ordinary shares -- on domestic shares it acquired after the decree.


But Jonathan Ross, a spokesman for DMG in London, said all the shares backing the derivatives program were purchased prior to the decree by ZAO Energomashexport-Invest, a Russian company created by DMG in 1995.


"We are having discussions with Gazprom as well as with the federal commission to resolve this problem," Ross said from London. Gazprom officials could not be reached for comment.


Analysts said Gazprom may have been irked by the scale of the program.


The 2 million controversial shares are worth about $800,000 at Friday's prices.


"Gazprom usually turns a blind eye on all those small derivative programs, even though some of them involved shares purchased after 1997," one analyst said.


The Federal Securities Commission said it would send write to the concerned parties to "redress the detected violation."