Brokers" ROTC Almost Losing Fondul Proprietatea

• Malaxa, Auschnit representative changes stand in FP Supervisory Board • Greg Armstrong, Cartesian: An OTC market is the worst option for listing FP shares

The Romanian brokers" dream to trade shares in the Fondul Proprietatea (the Property Fund) on the newly set up Romanian Over The Counter (ROTC) platform of the Brokers Association seems farther and farther as several minority shareholders and members of the Fondul Proprietatea Board expressed serious doubt about the brokers" initiative during a debate organised yesterday. The Romanian Government, which holds approximately 64 per cent in Fondul Proprietatea through the Ministry of Finance, was not represented in the meeting. Notwithstanding, the vote of the Ministry of Finance is crucial for the brokers" plan to have Fondul Proprietatea listed on the ROTC, considering that the FP Board yesterday said that the matter should definitely be subject to the shareholders" vote during a future General Meeting.

The biggest surprise of yesterday"s debate came from Corin Trandafir, a representative of the shareholders Malaxa and Auschnit on the Fondul Proprietatea Supervisory Board. After having voted a few weeks ago in favour of having FP shares traded on the ROTC and said that there was no need for minority shareholders to voice their stand in a General Meeting, Trandafir yesterday said he had changed his mind and that listing the FP on the brokers" platform would be ill-timed. Last month, the FP Supervisory Board approved the plan to have FP shares listed on the ROTC.

"My initial decision was based on talks with the shareholders and specialists in the United States. They later changed their mind, so I, too, reconsidered my initial stand and stated that trading on the ROTC is not the best solution for the Fund at this time. It is not a crime if one changes one"s point of view," Trandafir explained.

He further expressed fear that the listing of the Fondul Proprietatea on the ROTC would cause the Romanian Government to be less motivated to deliver on its commitment to list the Fund on a regulated market.

"So far, the Ministry of Finance has only reacted to pressure. If the State saw the Fund listed on the ROTC, it would feel discharged of its obligation to list it on the Bucharest Stock Exchange," the representative of Malaxa and Auschnit further said.

Greg Armstrong, the representative of Cartesian Capital Group, the holder of approximately 4 per cent in Fondul Proprietatea, commented that trading the FP on the brokers" platform would be ill-timed, as OTC markets usually had low liquidity and were hardly interesting to major institutional investors. Armstrong"s stand is radically different from that of Nicolae Ivan, a consultant for Cartesian, who told BURSA a month ago that any organised market was better and would be more transparent than the market on which FP shares were traded at the time.

However, Armstrong begs to differ: "We are not in favour of trading FP shares on the ROTC for the time being. I believe that the ROTC will not add to the value of the FP shares, but the contrary. OTC markets are good for smaller companies and not something of the calibre of Fondul Proprietatea. Moreover, these markets are not so liquid, and that bears a negative effect on the price of the shares traded on them, which can be as much as 25 per cent smaller than the price of the shares on a regulated market." The Cartesian representative pointed out that a smaller price on the ROTC could be a pressure on the value of the FP shares when the fund was going to be listed on the Bucharest Stock Exchange or another regulated market.

• CNVM says will supervise ROTC through the brokers

The potential listing of Fondul Proprietatea on the ROTC raises the question of the entity entitled to supervise transactions and the manner in which such transactions may be performed after the brokers commission the ROTC.

"The National Securities Commission will supervise such transactions because they are brokered by licensed brokers, who are supervised by the CNVM," Director Radu Toia said yesterday, pointing out that the capital market watchdog was only interested in the relation between brokers and investors and how transactions were going to be settled.

Another question would be whether the FP shareholders will still be able to trade their shares as they do now, "in front of the Central Depository" after the Fund is listed on the brokers" ROTC.

"It depends on the Fund"s agreement. If the Fund decides to be traded only on the ROTC, any trading outside the ROTC would be illegal," the CNVM representative explained.