Consob fines two Dutch funds for speculating on Saipem shares

There Consob puts two Dutch funds on the lookout per have speculated on Saipem shares in the summer of 2022, worsening the collapse of the stock following the start of the recapitalization operation, and sanctions the two subjects with a fine equal to the illicit profits made through the short selling activity.

Illegal conduct

Consob has ascertained that on the days from 12 to 14 July 2022, while Saipem's capital increase was underway, the Optiver and Flow Traders funds operated massively on the market with “naked” short sales, that is, not supported by a securities loan, which are expressly prohibited by Italian and European legislation. Furthermore the two funds have not fulfilled their reporting obligations provided by the supervisory authority for net short positions and to liquidity obligations required of “market making” entities that is, they carry out trade support activities.

In more detail, the two Dutch funds have violated articles 5, 6 and 9, which provide for the obligation of any natural or legal person to communicate to Consob the Net Short Positions (PNC) held on shares admitted to trading on regulated markets or multilateral trading systems when they reach, exceed or fall below of a relevant threshold and Article 12which provides for restrictions on “naked” short sales, i.e. short sales not supported by obtaining the availability of the securities that one intends to sell.

The two funds are also accused of having the warning made by Consob was ignoredin June 2022, precisely in view of Saipem's capital increase.

The transactions carried out

Consob objected to Optiver to have moved, through short sales and without having, in the ways required by law, the related availability of the securities, up to 9.4 million Saipem shares, equal to 44.33% of the capital of the state-controlled company, on the Euronext Milan markets and in the Trading After Hours exchanges. Furthermore, the authority ascertained that the purchase of 150 thousand option rights on the capital increase on 12 July would not have been sufficient to guarantee the fund the availability of securities within the deadlines set by the law.

Flow Tradershowever, sold short further 1.5 million Saipem sharesalso without having ensured the availability of the titles within the expected timescales, for a share of up to 7.2% of the capital of the company active in offshore drilling and petroleum engineering. Also in this case the purchase of 60 thousand option rights was not considered sufficient by the authority to cover these short sales.

The fines

The market surveillance authority therefore imposed harsh sanctions to the two funds, equal to the capital gains realized from their trading, and confiscation of profits made for a total of 9.6 million.

In more detail, Consob has sanctioned Optiver with a fine of 2.5 million and ordered the confiscation of 2.7 million in capital gains. Likewise Flow Traders received a fine of 2.2 million and the confiscation of 2.2 million in profits illegally made from the operations carried out.