UPDATE 1-Brazil watchdog rejects BTG Pactual's massive stock buyback plan

lunes 14 de diciembre de 2015 06:39 GYT

(Adds brokerage's stock purchases in recent weeks)

SAO PAULO Dec 14 (Reuters) - Brazil's securities industry watchdog has rejected a proposal by Grupo BTG Pactual SA to repurchase up to 41 percent of shares in circulation to stem a price slump triggered by the arrest of the embattled investment bank's founder late last month.

The watchdog, known as CVM, said in a decision published on its website and dated Friday that the proposal made by the managing partners at BTG Pactual a day after the arrest of former chief executive, chairman and controlling shareholder André Esteves could reduce drastically the number of the bank's stocks traded in the São Paulo Stock Exchange.

Under the plan, BTG Pactual announced a repurchase program of up to 10 percent of stock in circulation that could be extended to as much as 41 percent if the slump continued for a longer period. BTG Pactual is traded in the form of units, a blend of voting and non-voting shares in the bank's investment banking and private equity divisions.

Rio de Janeiro-based CVM said the repurchase of more than two in every five units in circulation could "increase trading risks" for the asset and perhaps lead to the "creation of artificial trading conditions" for the asset. Since Esteves's arrest on Nov. 25, units have shed 57 percent.

The stock rose almost 14 percent on Friday, the second day of gains since the detention of the billionaire, who was BTG Pactual's public face since its creation about six years ago.

The bank's brokerage unit has bought over 20 million units since Nov. 25, traders said, although it is hard to determine whether all or just a portion of those purchases were part of the buyback or simply client orders. (Reporting by Guillermo Parra-Bernal and Luciana Bruno; Editing by Mark Potter)