Registry Consolidation Is Not Just A Technical Operation

by MAKE
Ziarul BURSA #English Section / 14 aprilie 2004

The consolidation of share registers and shareholder registers is not just a computer operation as it requires meetings of the shareholder assemblies of all the companies listed on securities markets in Romania.

Shareholder assemblies have the role of ensuring that the records on shares and shareholders provided by registratars are accurate and, should there be any inaccuracies, to decide solutions.

Importantly, the register consolidation takes place within shareholder assemblies and not within securities institutions, as CNVM hints in its "Measure Order."

Such consolidation has never been conducted before for companies listed on RASDAQ, as the registers were transferred directly to The Romanian Shareholder Registry (RRA) from IMI (the information center that kept record of subscriptions performed within The Mass Privatization Program) in late 1996 and early 1997. The listed companies also received copies of the registers kept by IMI, but no one ever cross-checked them against RAA's registers.

Lacking any serious verification through the shareholder assemblies of the listed companies, the registers taken over by RASDAQ cannot have the legal status (or factual status, for that matter) of full-fledged registers as they remain mere lists that may or may not be correct. This explains how shadow companies or even non-existent companies ended up listed on RASDAQ. A famous example refers to the Petrotrans shares, which were traded until January 6th, 1997, although the company had been legally disbanded through a government ordinance half a year before. Consequently, real shares have never been traded on RASDAQ, but only records of subscriptions.

This situation prompted former CNVM vice-chairman Mihai Radu to say, back in 1997, that RASDAQ was a "semi-legal" market (the quote was included in a famous article published by "Bursa").

Other flaws added to the original one as time passed by: CNVM did not regulate "short' operations (share borrowing) on time, although such operations are common on any capital market and, as any other common operations, they existed despite the interdiction as brokers preferred to keep dual registers. Personnel changes within brokerage firms (as a matter of fact two thirds of the brokerage firms have ceased to exist since 1998) and various accidents sometimes caused the loss of "the other copy of the register,' which led to situations where certain shares appeared to be registered to different shareholders at the same time: to some as entries in shareholder registers and to others as shareholder certificates.

This is why it is perfectly plausible that, over the past few years, the number of shares on RASDAQ may have increased artificially. Obviously, the only way to correct such discrepancies is through shareholder assemblies. More importantly, this step is all the more necessary in light of the projected merger of BVB and RASDAQ.

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