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Country reports: Americas
Of the five individuals who were fined for using privileged information, three were found to have received information from the D&S director. The combined total of their fines surpassed US$2 million, with additional requirements that the three return earnings amounting to a further US$2 million.13 Announcing the fines, the head of the SVS emphasised that strong sanctions against insider trading were necessary to maintain investor confidence in the Santiago stock market.14 A second incident involving the potential misuse of insider information centres on Sebastian Piñera, one of Chile’s richest citizens and Michelle Bachelet’s opponent in the 2006 presidential election. In July 2006, just months after joining the board of directors of Chile’s LAN Airlines, and just one day before the company announced its first-half earnings, Piñera purchased 3 million shares in LAN, amounting to almost 1 per cent of the company’s outstanding shares.15 The ensuing SVS investigation revealed that Piñera had purchased the shares directly after LAN’s board of directors had approved financial statements indicating that company profits had increased by 31 per cent in the first half of the year.16 Shares jumped when the financial statements were made public the following day, leaving Piñera with a US$700,000 windfall.17 Although Piñera’s purchase of stocks appeared to be motivated by revelations at the board meeting,
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the SVS came to believe that he had made the purchase prior to learning of LAN’s performance, and noted that his order fitted within an established purchasing pattern. Not all observers agreed with the SVS decision, however, and they questioned the ethics of the purchase.18 In July 2007, in what proved to be a contentious ruling for both Piñera’s supporters and detractors, the SVS charged Piñera for allowing the purchase to move ahead even after he had gained privileged information concerning the company.19 The SVS’s strict interpretation of the law was questioned,20 including by Piñera, who denounced the findings as politically motivated, though he declined to appeal against the decision.21 In spite of the ruling, Piñera, a candidate for the presidency in 2009, appears not to have suffered politically from the incident. Though his financial activities were open to scrutiny from opponents in Congress, his approval ratings did not diminish.22 Like the D&S case, the use of insider information carried consequences for LAN. Following the SVS ruling, Piñera announced his resignation from the company’s board, citing his desire to distance his political identity from his business endeavours. Despite this decision, Piñera still held over 25 per cent of LAN’s shares in mid-2008.23
See www.latercera.cl/contenido/26_31373_9.shtml. SVS, 2008. Associated Press (US), 6 July 2007. Cooperativa.cl (Chile), 12 January 2007; SVS, ‘Resolución Exenta no. 306: Aplica Sanción de Multa al Señor Sebastián Piñera Echeñique’, 6 July 2007. Global Insight (UK), 9 July 2007. Latin American Weekly Report (UK), 12 July 2007. Specifically, Piñera was found to be in violation of article 165 of Law 18.045. For detailed information, see SVS, 6 July 2007. Qué Pasa (Chile), available at http://icarito.tercera.cl/medio/articulo/0,0,38039290_101111578_247676675,00. html. Associated Press (US), 6 July 2007. See www.jorgeinsunza.cl/content/view/65020/Intervenci_n_Caso_LAN_Pi_era.html; Brazil & Southern Cone Report (UK), 23 August 2007. El Mercurio (Chile), 29 July 2008.