NEW FINANCIAL REQUIREMENTS Brokers, in danger

• Brokerage firms hoping for a rescheduling of the contribution to the Investor Compensation Fund

• Investors may indirectly bear part of the burden of the increased payments to the Investor Compensation Fund

An eventual increase of the contribution paid by brokerage firms to the Investor Compensation Fund (FCI), which is being discussed on a European level, could bring to their knees some of the small and medium sized domestic brokerage firms, which have trouble making ends meet as it is, due to the fact that turnover dropped to a few million Euros a day.

There are ongoing talks on a European level, concerning the raise of the compensation cap from 20,000 to 50,000 Euros per investor. Romania has already received an exemption, as the authorities have agreed that the cap would not be raised to 20,000 Euros before 2012. The maximum guaranteed amount per investor has been set at 11,000 Euros per investor for the year 2010, and it will be raised to 15,000 Euros starting in 2011.

Brokers are concerned that a possible increase of the contribution will be fatal to some of them and they are hoping the schedule will be changed, when the European authorities eventually decide to raise the compensation cap.

At the moment, the contribution that brokerage firms pay to the Investor Compensation Fund is calculated as a percentage of the commission earnings and from the custody and management of financial instruments. Some brokers do not rule out the possibility of charging investors additional fees, because few of the independent brokerage firms will be able to bear the increased contribution by themselves.

"In 2007, for instance, when the market was rising, we paid a few tens of Euros to the Fund, unlike this year, when we only paid a few thousand Euros."

"If the contribution to the Investor Compensation Fund gets too big, the intermediaries may charge their clients a custody fee. In Romania, most brokers keep investors" shares in custody for free, whereas abroad this service is paid. We hope that the contribution will be increased gradually, because brokers can"t handle any additional taxes", said Nicolae Gherguş, the chairman and CEO of brokerage firm "Confident Invest".

Meanwhile, the Bucharest Stock Exchange as well as brokers are trying to come up with a solution that would relieve the burden of the contribution to the Investor Compensation Fund. In the past, brokers have tried to convince the Romanian Securities Commission to accept letters of bank guarantee as a replacement for the contribution to the Investor Compensation Fund. Market sources say that some brokers are also unhappy with the fact that if a brokerage firm exits the business, they don"t get back the money that they paid to the Investor Compensation Fund.

"At a time like this, any increase in the fees that brokers have to pay could kill five or six more brokerages. I can tell you that the BSE is very interested in solving this problem and that there are on principle talks between the BSE and the CNVM. The Board of the Exchange is also made up of brokers, it is known that the Bucharest Stock Exchange is trying to help brokerage firms. Our goal is to schedule the payments in such a manner as to avoid increased strain on brokerage firms. Right now it"s not up to us, rather it"s up to the CNVM. Raising the contribution is a very difficult decision", Octavian Molnar, deputy general manager of "IFB Finwest" and member on the Board of the Exchange, said for BURSA.

The Investor Compensation Fund (FCI) is intended to compensate investors if any Fund members are unable to pay the money and/or return the financial instruments owed or owned by investors. Since its inception in June 2005, the Fund has not experienced any situation that would require the payment of any compensation.