Capital Market Watchdog Drives Trend-Bacau Out Of Business

• Trend Chief Executive Bogdan Eugen: "We have very few employees left and we simply could not deal with everything"

The National Securities Commission (CNVM) yesterday revoked the license to operate issued to Trend - Bacau and gave the brokerage firm a fine of 8,000 RON for several operational irregularities identified during a comprehensive audit performed in mid-July 2009.

The capital market watchdog came to this decision nearly two weeks after having temporarily suspended Trend"s license to operate in an attempt to give the firm more time to bring their books to good order, sources said.

The toughest measures taken by the Commission yesterday are aimed at the Chief Executive and two of the Members of the Board of Directors, who have been banned from operating on the capital market for three years and fined 10,000 RON each.

"We think this is a bit harsh," Trend - Bacau Chief Executive Bogdan Eugen told BURSA. "We will probably contest the Commission"s decisions or file for a stay of execution. For the time being, we are analysing the situation.

During the audit, Trend was unable to provide the CNVM auditors with certain customer files and payment documents. According to the explanatory remarks accompanying CNVM"s decisions, Trend could not produce payment orders related to 15 customers for whom the firm had brokered transactions.

The CNVM auditors also found that several accounts had been discretionarily managed by employees of the firm"s branch in Radauti, who did not have the proper authority to do so, and that the firm had performed a number of transactions on behalf of customers, who had given different instructions.

Trend Chief Executive Bogdan Eugen claims that the firm has significantly downsized operations over the past few months and has therefore become unable to ensure compliance with all the legal requirements a brokerage firm must observe.

"There are so many regulations on the capital market... We have very few employees left lately and we simply could not deal with everything. They asked us to provide several documents, which we could not provide on time, because of staffing reasons and medical reasons," Eugen told BURSA. He stressed that the firm had the funds necessary to reimburse the sums of money owed to or kept in custody on behalf of customers, as required by the capital market watchdog.

"It"s not such a large sum of money we"re talking about. We have all the money and we can repay it to the customers without any problem. It will be more difficult to make all the transfer papers for 2-3,000 customers," he said.

Trend Chief Executive Bogdan Eugen seems to have resigned to CNVM"s decision banning him for three years from the capital market, although he has been part of the market ever since it came to being. "I have been operating on the capital market ever since the capital market started to exist in Romania. I will see what to do from now on," he said.

• Brokerage firms in financial trouble

Contacted by BURSA, Dan Paul, President of the Brokers Association, commented that this professional organisation did not have a monitoring and control mechanism to oversee brokerage firms. According to market sources CNVM in the Autumn of 2008 received a list of up to six brokerage firms that were facing financial problems. "I remember that, at the end of 2008, the Stock Exchange Committee sent CNVM a list of 5-6 brokerage firms facing financial difficulties, but I know that most of them have overcome them," one such source said.

The National Securities Commission also fined some of the Trend employees, most of whom internal auditors, between 2,500 RON and 6,000 RON and banned them from operating on the capital market for a year or two. Two of the Trend directors were fined 7,500 RON each and were banned from operating on the capital market for two and respectively three years. Overall, CNVM fined 10 Trend employees a total of 64,500 RON and issued a warning to an internal auditor of the firm.