EXCEEDING ITS PREROGATIVESThe ASF has started doing Sobolewski's job

Ziarul BURSA #English Section / 24 februarie 2015

The ASF has started doing Sobolewski's job

The oversight authority has recommended the listing of state owned companies

The news that the Financial Oversight Authority has recommended the listing of some of the state owned companies on the Bucharest Stock Exchange would sound good, if it didn't mean that in fact, the Authority is getting involved in things that do not concern it, and is exceeding its functions set through the law that created it.

From the "what other blunders the ASF has done" department, the Council of the Authority has announce on Thursday, that it has acknowledged the notification concerning the opportunity companies from the government's portfolio getting listed on the regulated market.


The ASF later explained that it has made suggestions concerning the listing of certain companies, based on an internal analysis, but that the decision lies with the shareholders, naturally.

Say what?

"The report discussed in the Board of the ASF is based on its own analysis concerning the potential issuers in the state's portfolio, which could be listed on the BSE", said the ASF, upon an enquiry by HotNews, and further said: "Based on these analyses proposals for specific sectors were made, which will be reviewed by the shareholders.

The decision concerning the listing of companies can only be made by the shareholders. As they agree to our recommendations, the details will naturally be announced. For now, there is no schedule of these listings, but they may happen in the coming 6-12 months".

Dear ASF, it is brokers that take care of IPO recommendations, as well as consultants and, at best, the Bucharest Stock Exchange, a private company that has every interest to grow, including through attracting issuers.

According to the law, the ASF exercises functions of authorization, regulation, oversight and control of the entities on the three markets that they are in charge of - the stock market, and the insurance and private pensions market.

In other words, the ASF must be above everyone else, and the actions that they are taking have to be for the benefit of all. Not to make specific recommendations to some shareholders. Furthermore, it is not very clear whether the ASF was addressing the shareholders of every company it has analyzed, and has instead just talked to the government, which would represent an act of discrimination, which is unacceptable for one whopper of a state controlled regulator.

It may have been passable had the ASF recommended the listing of all the companies in Romania that qualify for being listed. Although that isn't part of the prerogatives of the ASF either.

According to the law, "the supervision exercised by the ASF, is achieved by:

a) the granting, the suspension, the withdrawal or the refusal to grant, on a case-by-case basis, of authorizations, permits, certificates, exemptions;

b) the issuing of regulations, which get published in the Romanian Official Gazette, Part I;

c) auditing of the entities and operations stipulated in article 2 paragraph (1) based on the received reports and through on-location audits;

d) the rendering of decisions and the application of sanctions".

In this particular case, the ASF did not issue any permit, did not issue any regulation, it did not audit anybody nor has it disposed any measures.

But the ASF is persistent!

The Authority has also stated that "this action is part of the measures stipulated by the STEAM project for the development of the domestic stock market and the passage to the emerging market". And it goes on: "The ASF plays an active part in the promotion of these measures, including as to what concerns the encouraging of new issuers, the diversification of the instruments listed on the BSE and the increase in the trading volumes".

Which law is that part from? Or do we need to take their word for it?

Not even the information that the recommendations of the ASF are part of the STEAM project isn't precise. That is, of course, unless the STEAM project also contains stipulations that aren't public.

In item 4, the famous STEAM stipulates "increasing market liquidity and attracting new investors to the stock market", but specifies clearly how that would be done: "A. Developing and increasing the efficiency of the market-makers' activity; B. creating an education program on the stock market; C. the diversification of the types of organisms of collective investment bodies (OPC) regulated by the ASF (especially those that invest in the launch and development phases of a business); D. the creation of the legal framework concerning the creation and the operation of investment clubs; E. the reduction of the level of quotas / tariffs charged by the ASF; F. the attracting of specific categories of issuers on the stock market".

All of these are general actions, at the overall market level, for everybody. Nowhere in the STEAM project does it say that the ASF will make any recommendations to specific companies.

At any rate, at least Ludwik Sobolewski, the CEO of the BSE, must be pleased at the overzealousness of the ASF. The help from the authorization, regulation, oversight and control Authority is welcome for the BSE, in a year where no government listings are announced. At any rate, the Parliament, to which the ASF is subordinated, has other things to do then to check that the ASF complies with its prerogatives.

Perhaps for the moment, the initiative of the ASF would be beneficial.

The harsh criticism in this article may seem inappropriate. But are we going to do if, in the future, by accepting its current initiative, the ASF will start making delisting recommendations?!

It is the reason why the ASF substituting itself to what should be the commission for going public on the stock exchange should not be accepted.

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