New capital market law endorsed at last

The new consolidated capital market law was sanctioned by the President just two days before the deadline Romania had set in its promise to the EU regarding the modification of its capital market legislation.

The law is needed to provisionally close negotiations with the European Union on the “Free movement of services” chapter, which Romania pledged to complete by the end of the first half of the year, a deadline that would have expired yesterday.

The changes in comparison to the old legislation reside in the introduction of European legislative provisions into Romanian legislation. In addition, the law will allow for the merger of the Bucharest Stock Exchange with the RASDAQ Electronic Exchange.

“First of all, the law introduces greater flexibility in terms of the services that the operators on the market can provide and makes it easier for listed companies to raise cash from the capital market,” says Bucharest Stock Exchange (BSE) chairman Sergiu Oprescu.

The smaller companies, which will not meet the necessary requirements for being listed on a stock exchange, will be able to trade through the alternative mechanisms provided for by the law. The alternative trading systems will be managed by brokerage firms or by those that operate a stock market.

The chairman of the brokers’ association hopes to see the law bring a greater transparency for listed companies and more effective penalties for those found in breach of the law. “If the new law is better, then CNVM (the National Securities Commission) will be able to successfully impose issuer transparency very soon, as well as accurate and complete reports by auditors, while effectively punishing those that abuse the market or misappropriate company property for personal or group interests. If, however, the law is still not good, then CNVM has the opportunity to say so and start working on modifying it,” says Siminel Andrei, chairman of the National Association of Securities Companies.

Sergiu Oprescu believes the law introduces a wider range of instruments, as far as market operators and issuers are concerned, which means the capital market will be better able to perform its function as a fund supplier for companies.

“As for the Stock Exchange, the law stipulates the outsourcing of certain activities, which could have a negative impact on trading costs,” Oprescu says. The law will allow turning the Stock Exchange into a trading company, so that it can merge with the RASDAQ. How this merger will actually be carried out is supposed to be decided in the brokers meeting next week. The entire merger process could take well over a year.

Other important changes introduced by this law include the creation of a fund to reimburse investors in case an intermediary defaults. vlad.nicolaescu@zf.ro