The shares of financial investment companies (SIFs) dropped as much as 11% in a matter of minutes on the Bucharest Stock Exchange yesterday, after the Chamber of Deputies plenum approved – despite statements to the contrary from the representatives of the authorities, the changes made by the Budget-Finance Committee.
The decision of the Deputies caught the Bucharest Stock Exchange off-guard, and it suspended the SIFs from trading minutes after the enactment of the decision, so that some investors had enough time to dump stakes on the market, therefore crashing quotes. The SIF index, BET-FI, thus stopped at 44,560 points, 9% lower than on Monday, with the heaviest declines being registered by SIF Muntenia and SIF Transilvania, which ended the day with an approximately 11% fall. In the few minutes after the enactment of the decision when the SIFs still traded, their market value dropped by approximately 200 million euros. The proposed law prohibits any group of investors acting in concert to own more than 1% in a specific SIF and binds those that do to sell anything above 1% in a matter of three months. However in order for the new law to be implemented it has to be promulgated by President Basescu first. The National Securities Commission (CNVM) will have to issue regulations for enforcing the law and the SIFs will have to change their charters again.
Moreover, those targeted by these regulations say the provisions approved by Deputies are not constitutional. “I will not sell a single share. Not only that, but I will also challenge the law in the Constitutional Court. I don”t see how the state will be able to force me to sell since property is warranted by the Constitution,” businessman Catalin Chelu told ZIARUL FINANCIAR. According to the information on the market, he controls 15-20% in SIF Moldova and SIF Oltenia along with sizeable stakes in the other SIFs. The new change in the legislation concerning the caps for SIF stakes practically means going back to the situation a year ago, except that the cap was 0.1% instead of the 1% it is now. In addition, the stake cap is written into the law this time and cannot be changed by shareholders during the General Meeting.
Rumours on the market suggested that, since the 0.1% stake cap days, major investors had accumulated hefty chunks in SIFs through middlemen, but this was never possible to prove. Furthermore, there also were such investors that had even exceeded 0.1% through acquisitions on the market when the technological system of the Bucharest Stock Exchange was allowing this, but they could not be forced to sell even then.
The CNVM chairperson, Gabriela Anghelache, stated a few weeks ago that the institution she ran had never had any proof of the existence of groups of investors acting in concert, although the commissioners were aware of the information floating across the market. Anghelache said back then that the CNVM would set up a registry to list all the groups of shareholders acting in concert in case they file a statement attesting it. The CNVM, she added, had no way of checking whether other groups than officially declared existed or not.