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Colombia opens criminal probe into Interbolsa collapse

MYT 6:25:00 AM

BOGOTA (Reuters) - Colombia has opened a criminal investigation into the collapse of the country's largest brokerage, Interbolsa, Attorney General Eduardo Montealegre said on Wednesday.

Colombian authorities are liquidating Interbolsa after the brokerage failed to make a scheduled bank payment. The government has repeatedly said it was a one-time event and not indicative of wider financial problems in the economy.

Montealegre cited conflicts of interest, possible share price manipulation and "hiding" information as reasons for the investigation.

"The Attorney General's Office ... will initiate a criminal investigation to determine whether these behaviours, which are possibly administrative offenses, have criminal relevance or not," Montealegre told reporters.

The probe might have wider implications, affecting overseas investment at a time when Latin America's fourth-largest economy is attracting waves of foreign interest.

The financial market regulator essentially took over Interbolsa two weeks ago after it was unable to make a payment to a local bank due to a liquidity squeeze tied to repurchase agreements, or repos.

Interbolsa, with about 50,000 clients, accounts for about one-third of daily operations on the stock market. It has ceded control of its local bond portfolio to Bancolombia SA.

Market players have reacted with caution over Interbolsa's situation, agreeing it is probably an isolated case, but also staying alert to any signs of a spill over to other financial institutions and contagion from perceived risk.

"Everyone thinks, in the ideal scenario, that regulators are trying to make things more transparent ... but until there's more news, the market will remain the same, with a bearish bias and low trading volumes," said Andres Bernal, an analyst with the Casa de Bolsa brokerage.

"For foreign investors, the Interbolsa subject is not the greatest of their concerns, but it injects some additional market risk."

The problems have so far only affected the brokerage, which is part of the larger Interbolsa SA Comisionista de Bolsa that includes insurance and investment arms and also operates in Brazil, Panama and the United States.

Trading of the group's stock is suspended until Monday.

Colombia is also investigating if the brokerage evaded taxes with a capital fund in Curacao, the finance minister said on Wednesday.

Juan Ricardo Ortega, director of Colombia's tax agency said the authorities were also looking at some other parts of the group.

"There are related entities within the group that appear to have behaviour that is worrying and some are being subject to that type of investigation," Ortega told journalists.

"The issue is only starting and it's an issue that will need to be coordinated with the attorney general and the financial markets regulator," he added without giving more details.

(Reporting by Nelson Bocanegra; Writing by Jack Kimball; Editing by Sofina Mirza-Reid and Andre Grenon)

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