On 15th September 2014, The Economist has reported that Chile’s stockmarket regulator, the SVS, fined Julio Ponce Lerou (one of the wealthiest Chileans – estimated net worth of $2.3 billion) $70m for illegal share trading, the biggest single fine it has ever imposed. It also sanctioned seven of Mr Ponce’s associates, as well as the country’s leading stockbroker, LarrainVial. In all, the fines totalled a record $164m.

It is hard to say whether such fines will be paid. However, it cannot be denied that such a scandal casts a few doubts on Chile’s image as the least corrupt nation in Latin America. The Economist has highlighted that Hermann von Muhlenbrock, the head of SOFOFA, Chile’s biggest industry federation, described the case as “a serious threat to the transparency of the financial market”; foreign investors want to know they will not be swindled out of their money. The evaporation of confidence in Chile’s capital markets has already damaged the ability of some businesses located there to finance themselves. And trust in the country’s financial institutions has taken a blow. Only 21% of Chilean executives believe this was an isolated case, and 20% think it damaged the market’s credibility, according to a poll published on September 7th by Fondación Generación Empresarial, a corporate-responsibility group. Although 76% believe the regulator did a good job in pursuing Mr Ponce and his associates, 60% say it needs to be more vigilant.

Although the government has put a positive spin on the fines by claiming that they prove no one is above the law in Chile, investors and the business community are not so easily convinced. In truth, if the stock-exchange regulator is right, Mr Ponce and his friends were above the law for years. And nobody, not the government, not the minority shareholders, and least of all the regulator itself, seemed to notice.

Source: The Economist