Anatomy of a captured market: ASF symbolically "sanctions", Swiss Capital continues to collect

Swiss Capital was fined 65,400 lei and three more minor fines for several members of its management (including Bogdan Juravle), an action taken last month by the Financial Supervisory Authority (ASF) that could be mistaken, from a distance, for an act of rigorous supervision, if the discrepancy between the magnitude of the problems and the lightness of the sanctions applied were not so obvious.

ASF has once again managed to perform the performance of sanctioning without disturbing, that is, doing exactly what this institution does best, regardless of who runs it.

The CEO of Swiss Capital, Bogdan Juravle, was fined 20,400 lei, an amount that, in a normal year, does not even cover the costs of the paper on which the monthly statements from Active Dinamic are printed. And Olimpiu Blăjuţ, a compliance officer responsible for preventing money laundering, was "burned” with 33,695 lei, while Robert Pană, an RCCO officer, was sanctioned with 18,900 lei.

Beyond these amounts that can be paid without spoiling the feng shui of the "great Swiss”, the ASF "imposed the establishment of a plan of measures to remedy the irregularities found”, a wording so generic that it could mean anything or nothing.

We asked the ASF what concrete facts were involved, which were the companies or investors involved in the operations for which those at Swiss Capital were sanctioned, but we were sent to read last month's decisions, where all the respective data was anonymized by the Authority, under the pretext of complying with the GDPR.

Of course, everything happens in the same familiar register, about which the BURSA newspaper has been informing readers for more than seven years.

"SAI Swiss Capital transferred 6% of SIF4 shares to SIF1, shares that were purchased mainly with the money of SIF1 and SIF4 shareholders,” wrote investor Ben Madadi in a 2021 analysis.

And for this closed-loop maneuver - shareholders' money buys its own shares that then vote in favor of the management - ASF has always found a reassuring answer: "there is no conflict of interest”.

No talk of concertation.

Just repeated coincidences and "independent funds” perfectly aligned on the vote.

The fact that Swiss Capital manages the Active Plus and Active Dinamic funds, which "almost exclusively bought shares in SIFs” with the money of other SIFs, does not seem to have caused any startle at ASF. After all, if "Active Plus invests 86.11% of its assets in shares in SIFs", it is probably just a coincidence, and if "the shares are used for votes in favor of the management", it is, obviously, a democratic act, not concertation in the opinion of the ASF.

Ben Madadi said it clearly, unequivocally, for BURSA: "The Romanian market, as it looks now, is not made for investors. It is made for them: the asefists, the heads of the SIFs - sifoni as I call them - the heads of the BVB and their collaborators." And among the collaborators, Ben Madadi placed Swiss Capital at the center of the stage - "controlled by the great Swiss" Bogdan Juravle.

In fact, "Swiss Capital is not by any means the largest broker at the BVB, but a simple cog in a corruption mechanism, undoubtedly one of the largest in Romania today", the quoted investor also stated.

And the ASF?

Well, the ASF "is the most important member of the Cooperative", adds Madadi.

How could it be otherwise, when the same institution that should sanction conflict of interest covers it with serene silences, with summary answers and textbook detours?

For example, when asked about the collusion between the funds that bought SIF1 and SIF4 shares with the money of the same SIFs, the ASF replied dryly: "It is not confirmed."

That's it.

"Any explanation would have been self-incriminating," MAKE noted, in one of its articles, regarding the maneuvers made by Bogdan Drăgoi with the help of Swiss Capital at SIF 1 and SIF 4.

But what collusion are we talking about?

When "the funds with most of that money bought SIF1 and SIF4 shares”, and then "voted and are voting with those shares at the SIF1 and SIF4 general meetings in favor of the group”, it is clear that we are no longer dealing with an investment scheme, but with an engineering to consolidate power, according to the opinions expressed in recent years in the BURSA newspaper by investors Ben Madadi and Cătălin Buzdea.

"It is about the opportunity cost, to which are added the onerous commissions, paid without bringing absolutely no benefit to shareholders”, Madadi also writes.

MAKE captured the essence in one of its articles on this subject: "The dream of every broker: to get rich, without any contact with the natural clientele of the market - investors and/or issuers”.

Swiss Capital is already living it.

The 12.55% commissions collected from SIF Muntenia for the Active Dinamic fund are only the visible part of the iceberg. And the commissions taken ostensibly for "administration" are in reality for the passive holding of shares. And in exchange for these commissions, the funds present themselves at general meetings and vote, as Ben Madadi noted, "in favor of the premiership of Mr. Dragoi even if that vote were to the detriment of SIF1 and its shareholders".

A simple, round, efficient mechanism.

"A pathology with which the Cooperative of the three SIFs and the related brokers, together with their protectors in the ASF, have contaminated the entire market", Ben Madadi also specified.

"Swiss Capital presented itself at the AGOA [...] and voted against our request, the shareholders of SIF4, to hold the administrator of SAI Muntenia accountable", Madadi revealed, in a detailed analysis, after the investor wanted to take over, without receiving any remuneration, the management of SIF 4 in order to make the respective investment fund profitable for the small shareholders as well.

What else but a conflict of interest can there be when a fund invests the money of a SIF in its own shares and then votes in favor of the management that paid it?

And when you have doubts, the ASF gives you addresses with quotes from the law, but without any concrete action. And, sometimes, the "system" also rewards active players in the schemes that it is supposed to discourage.

Thus, in 2021, Swiss Capital was named "Broker of the Year" by BVB.

Of course, not for transparency or performance, but perhaps, as Ben Madadi wrote at the time, for "preaching the ideals of siphoning".

Although it seems paradoxical, the award given by BVB to Swiss Capital represents the sign of a solid partnership relationship according to Mr. Madadi: "Bogdan Drăgoi, like any self-respecting partner, through this grand gesture of award, offered a well-deserved relief to the Swiss [Bogdan Juravle]” for the difficult year they had. Because 2021 was full of "revelations about their deeds”. But, it's nothing. Ben Madadi noted: "Swiss Capital was forced to reduce its ticking commission at Active Dinamic from 12.55% per year to 3.6%”, a symbolic sacrifice for the peace of the market.

The relationship between Bogdan Drăgoi and Bogdan Juravle was also observed by our late collaborator, Mihai Antonescu, who stated in one of his analyses regarding SIFs:

"In fact, the numbers don't lie: without the contribution of SIF1 and SIF4, Swiss Capital would have recorded losses in the last six years. So, it wasn't performance that brought them to the top of brokers, but the deep relationships with the Lakis-Drăgoi group, through which investors' money is recycled, converted into commissions, and commissions into votes of support”.

"I have much better things to do than deal with waste”, said MAKE in an editorial, written about the capital market in our country. But even he admits that it is a moral obligation "towards the younger colleagues in the editorial office, towards the tradition of verticality of the BURSA newspaper, towards my career as a journalist and towards myself”.

MAKE argued in the same editorial that writing about Cooperativa, about Swiss Capital, about ASF is not activism, but hygiene.

In an editorial published in the newspaper BURSA, investor Cătălin Buzdea observed with almost English calm how ASF "slowly analyzes, at the pace of a ficus”, issues that "concern tens of thousands of shareholders and billions in assets”. "By the time a conclusion is reached, the facts have been prescribed, and the money has evaporated in commissions”, he notes, with an irony that leaves no room for confusion. Buzdea points out without raising his voice: "ASF imitates transparency with the same conviction with which the Cooperativa imitates legality”.

In such a context, the fines recently applied by ASF in the Swiss Capital case seem like a gesture of courtesy. A formality, a reverence. Meanwhile, shareholders' money continues to feed funds that serve only one purpose: maintaining a control structure that has lost all connection with the spirit of the free market. And, with each vague answer or bureaucratic delay, the ASF sinks further into its preferred role: decorative supervisor, part of the decor, not the solution.

The Romanian capital market is not weak because investors do not understand it. It is weak because investors understand it too well.