Cyprus Stock Market Bubble Raises Awareness Of Financial Fraud

by Philip Morton, Investors Offshore.com

25 February 2002

There have been calls in the Cypriot media for tighter regulation of financial fraud and white collar crime as investigating authorities attempt to get at the root cause of the 1999-2000 Cyprus Stock Exchange bubble, in which investors lost millions as the result of artificially inflated share prices.

In a report released on Friday, local newspaper Cyprus Weekly praised the activities of the Watchdog Committee of the House of Representatives, which is investigating the causes of the bubble, but called for tighter supervision of auditors, increased powers for regulators, and greater public education in order to ensure that such a situation does not arise again.

Likening the 2000 crisis to the aftermath of the recent collapse of Enron, the newspaper called for new standards to ensure the independence of auditors from CSE activities. The report also called for an increase in the investigative powers of the Cyprus SEC:

'The appropriate authorities should develop the capability to investigate any suspicious movements of share prices that would appear to suggest that someone is creating a false market,' it observed. 'Legislating is not enough. The ability to detect and investigate is required.'

The repercussions of the CSE bubble have been far-reaching, and last month even the Governor of the Central Bank came under the Watchdog Committee's spotlight over allegations that his son had benefited from manipulated stock prices. However, Afxentis Afxentiou strenuously denied any accusations of wrongdoing, and complained to the House Speaker over the treatment that he received at the hands of the Watchdog Committee Chairman, Christos Pourgourides.

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