AFTER A NEW STING ON THE STOCK MARKET "Harinvest" clients start counting their losses

The case of "Harinvest", the brokerage firm which was suspended for three months, because it did not have the money to settle some trades, is proving a lot more serious then it initially appeared.

One of the clients of the brokerage firm from Râmnicu Vâlcea claims that he was left without money and shares in his accounts, according to some market sources. The total losses allegedly amount to 2 million Euros.

Furthermore, the investors in question were allegedly heard yesterday by the criminal investigation bodies, as some of them were not even aware of the existence of the Financial Supervision Authority (ASF).

The representatives of the ASF last night told us that they have notified the competent authorities after November's investigation at "Harinvest", even though in 2012 the brokerage firm had already been sanctioned for using the money of some of its customers to cover the trades of others.

The officials of the ASF said: "The most recent audit of the Financial Oversight Authority (ASF) at Harinvest was initiated in mid-November (November 15th - December 27th). Immediately after the audit ended, the ASF suspended the operating license of Harinvest for a period of 90 days. The ASF has also uncovered sufficient reason to notify the competent authorities, in the case of Harinvest, which it has actually done. The findings of the entire audit will be discussed with appropriate celerity, and the Financial Oversight Authority will debate all the measures which are required following the findings.

The former CNVM had previously audited Harinvest at the end of 2011 and applied several sanctions (in January 2012) to Harinvest. At the time, the employees of Harinvest were sanctioned, among others, for using money from the firm's creditor customers to cover up the debit balance of other clients, which is a misdemeanor (not an offense)".

The clients are angry at the institutions of the stock market, accusing them that they were aware of the problems that "Harinvest" had and that they knowingly covered up the situation, as the Central Depository had used 500,000 Euros, half of its Guarantee Fund, to cover up the losses caused by brokers.

At the request of "BURSA", the representatives of the ASF told us that these accusations are nothing but speculation: "There are no situations of violation of the legislation and of the market rules that the authority has knowledge of and that it is tolerating. The audit from November (ed. note: made at Harinvest) has uncovered new aspects compared to the fines that were levied in January 2012, and the sanctions were levied and will be levied accordingly".

According to the information sent by the Central Depository, at the end of last month, the Guarantee Fund was rebuilt, as the money was recouped.

It would seem however, that the brokerage firm in question has settled its debt to the Depository by selling stocks from the portfolios of its clients.

Furthermore, the investors who experienced this kind of losses are saying that the managers of "Harinvest" can't be found.

In November, when "BURSA" was the first to report the situation of "Harinvest", the representatives of the Central Depository were saying that the "incident" was no reason for worry, even though it was the first time when the Guarantee Fund used such a big amount.

At the time, Cristian Agalopol, the president of the Central Depository told us: "Since partial or failed settlements are common events on the developed and emerging markets, we should not look at them as operations outside the stock market or as exceptional situations. Central and European depositories have risk management mechanisms stipulated in their procedures for the markets on which they operate, to ensure that the settlement process is conducted with a controlled risk. (...) Since this kind of situations are frequent on most markets, including those we like to compare ourselves to, they should be looked at as such and not pay more attention to them than needed".

Yesterday, Ludwik Sobolewski, the CEO of the Bucharest Stock Exchange, told us that he was aware of the fact that some investors were unable to get their money back from "Harinvest", but said that he had no comment on the subject for the moment.

The representatives of the Investor Compensation Fund did not offer us a statement yesterday, by the time the newspaper went to print.

Our market has experienced several resounding scandals lately.

After broker Cristian Sima fled the country last year, as he was accused of having lost the money of his clients after trading without a power of attorney, the market was recently shaken by the news of the theft of shares from the portfolios of the head of the IFC, Ana Maria Mihăescu and of other investors, using forged documents.

While in the case of Sima, the CNVM (the predecessor of the ASF) had claimed that it had no competence in the matter, because the broker had operated through an offshore, in the case of "Harinvest", the authority levied a fine of 6,770 lei against the company, representing 0.1% of its turnover for 2012. Still, the brokerage firm saw its operations suspended for three months, and stock market specialists consider that it is unlikely the firm will return.

SSIF "Harinvest" has initiated sell-outs from its portfolio, after it did not have the money to settle trades involving structured products issued by Erste Group.