Report on EPF’s primary and secondary market transactions
In BDO India’s report on the EPF primary and secondary market transactions, it said that observations in this report are subject to completion of an interview with the former Governor Ajith Nivard Cabraal.
During January 2003 till February 2015, the PDD conducted 465 auctions. The EPF, although a primary dealer, has not participated in 190 of these auctions. It may be noted that the EPF has not participated in more than 60 per cent of the auctions during 2003, 2007, 2008 and 2009.
The EPF Fund Managers (current and former) stated that at times the PDD requests the EPF not to participate in an auction and invest the EPF funds through the Direct Placement. The EPF has also followed the practice of investment through Direct Placements rather than participation in auctions. However, there is no evidence of such instructions from the PDD in writing, produced for review.
As per Investment Trading Guidelines (ITG), 2011, the Head of Fund Management Division (FMD) can approve investments valuing Rs. 2 billion per day. In 50 out of 143 instances, the Head of FMD had exceeded the specified limit for the investment transactions in the HTM portfolio. The same transactions were reported in the market variance observation and the resulting loss amounting to Rs. 205 million out of Rs.565 million in 2014.
Digital forensics
BDO India performed extensive digital forensic/eDiscovery procedures on individuals identified from the document reviewed, discussion and interview with key stakeholders.
As per an email conversation between an EPF dealer and a private dealer, it was evident that the Secondary Market was manipulated by some of the primary dealers who had benefitted from such market condition. “It also appears that (EPF dealer) was involved in the market manipulation…”
The EPF’s loss from transactions in the Primary Market (Auctions and Direct Placements) was Rs. 9,074.33 million and loss from transactions in the Secondary Market (Investments and Divestments) was Rs. 751.61 million.
It was noted that the loss assessed due to transactions with Perpetual Treasuries Ltd (PTL), Pan Asia Bank (PABC) and Wealth Trust Securities (WTL) in 2014 amounts to approximately Rs. 320.82 Million (56.77 per cent of total loss in 2014 and 51.68 per cent on the overall loss for the period) with the variance in the yield rate ranging from 4 to 80 basis points.
The EPF’s loss from transactions in the Primary Market (Auctions and Direct Placements) was Rs. 9,074.33 million and loss from transactions in the Secondary Market (Investments and Divestments) was Rs. 751.61 million.