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. Last Updated: 07/27/2016

Brokerage Faces Probe Over UES Stock Fixing

The NAUFOR shareholder rights group has begun an investigation into the activities of brokerage firm Brunswick UBS Warburg to establish whether the company manipulated the market for shares in national power grid Unified Energy Systems.

The investigation is being done at the request of UES.

The audit is seen by some as a fail-safe public relations exercise for all involved.

In the heat of its restructuring conflict with shareholders, UES has been given an opportunity to show how much it cares about investors’ rights.

Just as the question of the role of self-regulatory bodies on the stock market is being discussed, NAUFOR can now demonstrate its usefulness.

Brunswick, meanwhile, should have no problem disproving the claims.

The Federal Securities Commission, could be added to the list of participants in the PR exercise — it will get extra leverage to argue for additional control over market participants.

UES recently appealed to NAUFOR and the FSC requesting that it investigate media reports that a major brokerage firm is manipulating the market and thus damaging UES’ reputation. UES did not specify which information it wanted checked.

NAUFOR president Ivan Lazarenko, who is also a member of the UES board of directors, said NAUFOR had to clarify this separately.

He confirmed that Brunswick UBS Warburg is to be investigated.

Brunswick is part of the same group as Brunswick Capital Management, which is one of the main opponents of the UES management’s restructuring plan for the energy holding.

The Brunswick Russian Growth Fund, a fund managed by Brunswick Capital Management, made an error that led to UES head Anatoly Chubais convening an extraordinary general meeting of shareholders a month ago.

A clerk had confused shares with American Depositary Receipts, which resulted in the growth fund claiming more votes than it was due.

In the course of the investigation, NAUFOR will collect publications and presentations, especially negative ones, given by Brunswick UBS Warburg representatives from April 4 — the date the UES board of directors met at the Kremlin when the restructuring plan was first announced, Lazarko said.

The main problem that investigators will face is the almost total absence of legislation in this area, Laufer said.

One of the few occasions where the term "manipulation" is used in Russian legislation is in the law on the securities market.

The law merely forbids professional participants of the stock market from manipulating the market. It does not specify the exact methods and says the fact of manipulation must be established by a court.