SIF law: two years of talks and no certainty yet

The raise of the maximum percentage an investor is allowed to own in a Financial Investment Company (SIF) from 0.1% to 1%, taken for granted and eagerly awaited by the players on the Stock Exchange for almost a year now, has become a hot potato again in the last few weeks.

The special SIF bill, which should have regulated the rise in the interest threshold, was suspended (after one year of talks in four ministries and the National Securities Commission-CNVM) and the ball eventually ended up back in CNVM’s yard. The Commission is now devising the consolidated capital market law draft, which should include a chapter regulating the operation of the SIFs and compensate for the suspension of the special SIF law.

Only that whatever had become predictable following the debate on the special law draft, i.e. the raise of the maximum stake and the shareholder control over SIFs management, is now getting unclear.

The talks over whether the maximum holding should be raised or not, a step investors would like to see taken but the management of the five SIFs would not, have been resumed and the market has no information as to how the SIF will be regulated in the end.

“Nothing is clear. The special law draft, which has been pushed from one ministry to another over the last twelve months, was suspended and the decision on the legislative situation of the SIFs is to be made by CNVM and the pre-accession consultant. Which consultant we hold in high regard, but is not that familiar with the capital market peculiarities,” says Ion Cuzman, chairman of SIF Banat-Crisana and of the National Union of Collective Placement Bodies (UNOPC).

CNVM representatives would not comment on the law draft, yet Commission sources say raising the maximal threshold to 1% is no longer a sure thing.

At present, no investor may vote for more than 0.1% in a SIF. This provision has prevented shareholders from having any control over how the five companies are run, which has negatively influenced the SIFs’ quotes on the Stock Exchange and caused a number of feuds between investors and SIF chairmen.

The five SIFs are among the richest companies in Romania, each of which holding more than $100 million in assets and disbursing significant amounts of money as dividends every year.

SIFs’ price on the Stock Exchange is three times higher now than it was early last year precisely because of the special SIF law draft, which paved the way for tighter control from the shareholders.

Albeit the special law draft has been suspended, and a 1% threshold no longer looks like a sure thing, the brokers feel the trend of the shares will not suffer that much as a result.

“Even though prices went up because of the prospect of the threshold being raised, I think a contrary decision will not impact on the shares. After all, whoever buys SIF shares now will get 15-17% six-month yield from dividends alone,” says Grigore Chis, SIVM Broker trading manager. laurentiu.ispir@zf.ro