Broker - Cluj Case Reveals Unconstitutional CNVM Bylaws

• Parliament controls CNVM, but CNVM can evade subordination through its bylaws

• CNVM claims Broker penalty is not a penalty!

To start with, let us first clarify the confusion that CNVM was so careful to create around the punitive nature of their decision. "... CNVM convened on 29 January 2009 and decided to suspend the operating license of SSIF Broker S.A. - Cluj Napoca as a precautionary measure and not as a penalty." (CNVM press release of 13 February 2009). The same idea was advocated by CNVM Chairperson Gabriela Anghelache during television programmes and within the explanations recently offered to BURSA.

No matter how hard we tried to demonstrate that, for a brokerage firm, there is no greater penalty than suspension, the commissioners" insistence that their decision served other purposes than punishment makes this idea somewhat plausible. One could even say that they ignored the fatal consequences on the brokerage firm and accepted them as "collateral damage" necessary for the performance of a proper audit. (The demonstration that, in fact, a proper audit could be performed perfectly without suspending the brokerage firm adds new links to the chain of arguments, which is already fading into technicalities).

So let us set logic aside, for it does not help us in front of a time-conscious audience. Let us use whatever "the customer" gives us. Let us access CNVM"s website and see where we find CNVM Ordinance no. 65 / 29.01.2009 regarding the suspension of SSIF Broker.

Surprise!

The ordinance is filed under the category "Penalty Ordinances!"

How nice!

How wicked!

CNVM ruled a penalty that is not a penalty!

This evidence that CNVM is trying to fool us would be enough to ruin our confidence in the seriousness and competence of the Commission. This should worry the commissioners, because it undermines the "de facto" authority of the capital market regulator.

But this is not the case. The commissioners are not worried at all. And they have good reason why they couldn"t care less. And the reason is to be found in CNVM Bylaws Art. 7, paragraph 7: "CNVM is the sole authority entitled to pass judgement on the timing, evaluations and qualitative analyses which form the grounds of its rulings..."

In other words, it"s not just us, common citizens, who do not have any legal grounds to judge any CNVM decision, but no other institution, be it a court or the Parliament, can legally criticize what the Commission decides. Consequently, to say that what CNVM did was stupid or abusive is just the exercise of the constitutional right to free expression. The dogs may bark, but the CNVM caravan moves on. The fact which we pointed out, that CNVM"s decisions are contradictory and that the CNVM website is contradicting the CNVM press release, is irrelevant compared to the CNVM bylaws.

Yes, CNVM can say "black" yesterday and "white" today. No matter what, they are the only ones legally entitled to say anything on the matter and it does not matter how often they change their mind: it is a legally grounded black-and-white game. No institution of the State has such prerogatives. CNVM is above anything and that includes Parliament, although the CNVM bylaws stipulate that CNVM is subordinated to the Parliament.

Under Article 7, CNVM can defy the Parliament, which can pass judgement on the annual activity report of the Commission, but not on "the timing, evaluations and qualitative analyses which form the grounds of its rulings..." Under these circumstances, I wonder how the Parliament can pass judgement (evaluate and qualitatively analyze) on CNVM"s annual activity report... CNVM"s activity is to supervise, issue regulations and decisions upon which only CNVM is entitled to pass judgement. What can the Parliament do? They can ask the Commission: "What do you think, have you been naughty or nice this year? Mmm, you"ve been nice... Ok, you"ll get a nice grade."

The CNVM bylaws are not part of the Capital Market Law. It was instated by the Adrian Nastase Government through an emergency ordinance on 13 March 2002. It was countersigned by then Minister of Finance Mihai Tanasescu and CNVM Chairperson Gabriela Anghelache. I imagine that the said Article 7 was sneaked in there by commissioners terrified that they could be arrested too, just like Boboc Stefan, the former Chairman of CNVM. Less than two years before, Boboc Stefan had been arrested in the incredible scandal triggered by the disappearance of all the money in the FNI, the largest mutual fund in the year 2000.

Boboc set the outstanding record for being the only chairman of a securities commission in the world to be arrested. The only one in history. The only one in geography. It happened in Romania! So the fear of the new commissioners was quite natural. But, with such bylaws and six years later, the commissioners" fear has become carelessness.

This is the profound explanation of CNVM"s abusive decision. CNVM is aware of it. In order to shut up Alexandru Peres, Vice Chairman of the Standing Bureau of the Senate, who had asked for explanations in the Broker - Cluj case, CNVM invoked Article 7 of their bylaws. In other words, they sent him packing. Politely. Of course, the current CNVM bylaws are unconstitutional. A new ordinance could correct it.