HOLDING INCOMPATIBLE POSITIONS Valentin Ionescu can"t decide between the Exchange and the Depository

For more than a week now, Valentin Ionescu, the general manager of the Bucharest Stock Exchange and president of the Central Depository has been in a situation of incompatibility between the positions he is holding, according to a decision of the Romanian National Securities Commission (CNVM) which prohibits the members of the Board of Directors and the managers of a market operator from concurrently serving on the Board of Directors or as managers of a Central Depository.

Valentin Ionescu had until May 31st to opt for one of the two positions, but he has yet to announce his decision, in spite of all the official and unofficial messages that the Romanian National Securities Commission gave him telling him that he should resign either from the Stock Exchange or from the Depository.

Mr. Ionescu said yesterday that he is waiting for a clarification from the Romanian National Securities Commission, following which he will make a decision. There are rumors in the market that the officials of the BSE have asked the Commission to extend the deadline by which Valentin Ionescu was supposed to opt for one of the positions that he holds.

"I am waiting for a clarification from the Romanian National Securities Commission myself, and after that, I will make a decision", Valentin Ionescu said yesterday, and he added: "The Exchange has to have one of its own men on the Board of the Depository. It is true that the members of the Depository are elected by the General Meeting of Shareholders of the Exchange, but at this moment, of the employees of the BSE, I am the only one serving on the management of the Depository".

The officials of the Bucharest Stock Exchange have constantly insisted that they need to send an official on the management of the Central Depository, since the BSE is the majority shareholder of the clearing and settlement house, with a stake of 66%.

Octavian Molnar, director of the BSE, considers that the Exchange should have the freedom to manage its internal affairs, including putting its own officials on the Board of Directors of the Depository.

"We have accepted not having any of the directors of the BSE serve on the Board of the Depository to avoid having a fight with the CNVM", Octavian Molnar said yesterday, referring to last year"s situation, when three directors of the BSE withdrew from the competition for the presidency of the Depository.

"However, what the CNVM is forcing us to do now is a violation of the right of ownership", Octavian Molnar said.

Even though, at the end of last year, the management of the BSE implied that it would submit to the will of the CNVM, it later tried at the last minute to obtain the suspension of the Decision which prohibits the cumulation of management positions, by going to court.

However, on May 30, one day before the expiration of the deadline by which Valentin Ionescu was supposed to comply with the law, the Court of Appeal of Bucharest rejected the petition of the Bucharest Stock Exchange. The court found the request of the BSE to be "without merit".

Two days later, the Romanian National Securities Commission announced that it has rejected the challenge of the BSE of the Decision of the Romanian National Securities Commission, by which it requested "the finding of the absolute nullity and the illegality of the restrictions on the right of usage according to Commercial Law that the Decision contains".

Among other things, the lawyers of the Exchange have complained that the document which was challenged exceeds the lawmaking abilities of the CNVM which are attributed to it under by the law and by its Bylaws and that the stable administration and the development of the companies which are part of the BSE group can only be performed efficiently in a coordinated manner.

However, the lawyers of the Commission have deemed the challenge of the Exchange unfounded, emphasizing that the CNVM is the competent authority when it comes to market regulation and oversight.

The officials of the Romanian National Securities Commission have explained that prohibiting the holding of multiple management positions was intended to, among other things, prevent conflicts of interest, and restricting the cases where certain people could obtain information that other people don"t have access to, and restricting the access of the directors of a market operator or of a depository to confidential information, in order to avoid unfair practices which would harm investors.