Forgery And Fraud At "Broker" Subsidiary In Deva

• Petru Prunea: "We don"t know how far our responsibility extends"

• BRK shares drop 12.04% following the news

• Broker - Cluj is the third brokerage firm investigated by CNVM for irregularities

The National Securities Commission (CNVM) yesterday ordered brokerage firm Broker - Cluj (BVB:BRK) to close their subsidiary in Deva for 45 days following the irregularities found during a fraud investigation. CNVM made this decision a few days after the police had sealed the office to secure the documents reflecting the brokerage activities performed there pending their transport to Cluj for further investigation. Among others, the brokers working in the Deva subsidiary of Broker - Cluj are suspected of having collected sums of money from customers based on forged receipts.

Everything started in late December last year, when a customer asked us to give him his stock portfolio, but the portfolio was nowhere to be found in our records," SSIF Broker - Cluj CEO Petru Prunea told BURSA. "We started an investigation, we notified the police and we asked CNVM to close the office in Deva because we do no want to work with those people anymore," Prunea added. "Indeed, we found that sums of money had been collected based on forged receipts which had never been logged into the database," he said.

CNVM revoked the brokerage license issued to the head of the SSIF Broker subsidiary in Deva on the count that he had not "maintained records and accounts in such a way as to ensure their accuracy and traceability to the financial instruments and funds held by the agency on behalf of the customers.

• Who pays for the loss?

The overall operations of the Deva subsidiary of Broker - Cluj amount to approximately 3 million RON, according to Petru Prunea. For the time being, it is not clear what the loss caused to customers is and who is going to cover it. "We will see if the losses will be compensated by Broker - Cluj or the former head of the Deva office," Prunea said, adding that the firm had made some provisions for loss. According to him, an investigation is taking place. Existing customers will be routed to the head office in Cluj Napoca.

• BRK stock suspended from trading

BRK shares were suspended from trading between 13:47 - 14:55 yesterday, until SSIF Broker issued a press release to inform investors about the case in Deva. The press release indicates that the closure of the subsidiary in Deva and the agency in Satu Mare was part of a plan to "optimize networked operations." The press release also mentioned the serious deficiencies found at the Deva subsidiary.

• SSIF Broker stock drops 12.04%

After transactions were resumed, BRK shares dropped 12.04% to 0.084 RON/share in just an hour and a half. "What happened in Deva will probably have consequences on the BRK quotations on the Stock Exchange. People don"t realize that we have 36 offices and only one of them was affected by this problem," Prunea added.

The Bucharest Stock Exchange Board in October 2008 placed SSIF Broker under supervision following the incorrect reporting of their net asset value. The supervision period ended last week.