Risk of manipulation at the "Proprietatea Fund"

The oversights in the new mechanism to be used for issuing new conversion deeds for shares in the "Proprietatea Fund", starting with May 2nd, allows the depreciation of the compensation awarded to former asset owners. (These flaws can be used at any time as backdoors for manipulation, which makes one wonder whether they are indeed mere oversights.)

The National Authority for the Restitution of Properties (ANRP) announced that it has resumed the issuing of conversion deeds in the "Proprietatea Fund", with 1.4 billion shares in the Fund to be issued, representing about 10% of the share capital of the Fund. The shares pertain to the 1,284 briefs with requests for compensation in stock, registered between January 11th and April 15th.

In reply to our query, the officials of the ANRP said that "in the case of conversions completed between May 2nd and May 6th, the ANRP will use the average weighted price calculated for the first 60 days of trading, calculated and communicated by the BSE on April 19th, (0.6176 lei/share), and for the conversions performed starting on May 9th 2011, the ANRP will use the average weighted price calculated for the last 60 trading sessions of the Proprietatea Fund".

According to the representatives of the institution, the conversion deeds will be issued based on the order in which the files containing requests for stock options have been submitted, filed by their titleholders during the suspension period (January 11th -May 2nd).

What is the deadline by which the ANRP must issue the conversion deeds, once the cases are registered? Who guarantees that speculators won"t affect the price of the stock during that period, depending on the interest in the compensation?

The registration of the requests for compensation in stock or in cash is a tedious process which can take from a few weeks to a few years.

Some of the former major owners expressed their discontent at the fact that the solving of files takes far too long, but is suddenly sped up when the files are sold by their owners to people who have greater influence with the authorities.

This complaint can not be disregarded, especially as Romania"s widespread corruption places it among Europe"s most corrupt countries.

The prosecutors of the DNA have already announced that they are investigating two persons charged with influence peddling with the ANRP, after arresting in flagrante delicto Victor Ciocoiu of Constanţa, just as he was receiving money from a lady to which he had promised he would help her be compensated faster by the Proprietatea Fund.

"After the ANRP issues the decision concerning the compensation deed following the approval of the case, the titleholder (ed. note: the former asset owner) can come to the headquarters of the ANRP, and submit request opting to be compensated with shares, and the date when they do so will be considered as the registration date", the officials of the institution said.

Former asset owners complain that the order in which the compensation option requests are registered depends on the subjectivity of the employees of the ANRP, which influences the order in which the conversion deeds are issued.

Moreover, no one can say with precision how long after the registration of the cases the ANRP is required to start issuing conversion deeds, because neither the law 247/2005 concerning justice and ownership reform nor the Ordinance no. 81/2007 mentions any deadline for doing so, says Mr. Marius Murgu, the president of the Association of Private Shareholders of the Proprietatea Fund. He said that when the Authority was criticized for not setting a deadline for issuing conversion deeds, it invoked the provisions of Law 554/2004 which states that a person which has not received an answer to its complaint within 30 days can take the matter to court.

The time elapsed between the registration of the file registration requests and the issuing of the conversion deeds is important, given the fact that the price of the shares of the Proprietatea Fund fluctuates from one day to the next, without the former owners being protected in any way by a potential put down of the price by speculators who may have advance knowledge of the list of those set to receive new conversion deeds. Furthermore, a speculator can also determine how much it would cost to manipulate the price of the shares of the Proprietatea Fund for 60 days and how much he would stand to gain by receiving the compensation in shares at the price resulting from his manipulation.