SIF Transilvania Under Pressure Mihai Fercala Withstands The Coup

The attempt to remove Mihai Fercala from his position as president of Financial Investment Firm (SIF) Transilvania failed in the face of The Shareholder Assembly which convened in Brasov late last week and reelected Fercala to The Board with 92 percent of the votes, although his adversaries had received surprising support from The National Securities Commission (CNVM). The Commission recently invalidated Fercala's appointment as president of SIF Transilvania, although the appointment had been made three years before.

The SIF Transilvania Shareholder Assembly was called to convene on Friday and Saturday to appoint new Board members to fill in the two (out of seven) seats vacated by the resignations of two dignitaries whose positions on The Board of SIF Transilvania had been deemed incompatible with their public offices. Fercala's adversaries tried to take advantage of this election to take control within The Board.

A month before, Dan Paul, the president of brokerage firm Finaco Securities, had asked a court to forbid SIF Transilvania shareholders to vote through proxies on the count that such voting system would perpetuate the current Board membership endlessly. As the court denied the request, Paul appealed and asked the court to order the postponement of The Shareholders Assembly meeting until a final ruling on the matter.

The Shareholder Assembly convened on Friday morning only to ascertain a lack of quorum and adjourned the meeting for the next day. Also on that morning, it was made public that the court had denied the motion for the postponement of the Shareholder Assembly until the final ruling on Paul's petition. In the afternoon, Paul received surprising support from The National Securities Commission (CNVM). Sent by courier, an emergency resolution by CNVM chairperson Gabriela Anghelache invalidated Mihai Fercala from his position as chairman of The Board, a position he had been appointed to three years before.

The news was a ticking bomb that exploded when The Shareholder Assembly convened on the following day. Fercala argued that CNVM's resolution was illegal and that he was going to challenge it, especially because it was his belief that Anghelache had issued it on her own behalf, without the endorsement of a quorum of CNVM commissioners.

Fercala also said that he had already been in court with the group of shareholders contesting him on the count of a conflict of interests between his position with CNVM and his position and other functions and that he had won all suits. He added that the recent CNVM resolution was based on a notification from The Police Inspector General's Office, which had no prerogative in this case.

The reference made to The Police's involvement in the case, as well as CNVM's surprisingly abrupt change of attitude (The Commission risked making a haste decision that could be challenged later) suggest that a new and very powerful player has stepped into the game at SIF Transilvania.

Years ago, at the beginning of his term, before the scandal at The Romanian Discount Bank (Banca Romana de Scont), Premier Adrian Nastase sent a letter to CNVM in which he expressed a number of suspicions hard to understand regarding the SIFs.

A possible explanation for the tension between Adrian Nastase's team and the SIFs could be that, although they initially were members of the incumbent ruling party, the leaders of the SIFs have turned professional in the meantime and dissociated themselves from economic decisions made upon political orders.

Since the Premier's attention to the SIFs became recurrent, it was expectable that it should recur this year too, before the elections. An intervention from such a high offoce would explain the abruptness of the said changes of attitude and the authorities' joint efforts against Mihai Fercala, who is probably the most independent SIF leader.

This situation fit Dan Paul like a glove and he speculated it against Fercala during The Shareholders Assembly meeting on Friday. Nevertheless, Fercala signed his name on the list of candidates for the two vacant seats on The Board, while contesting CNVM's resolution. Fortunately for him, he was elected for one of the two seats with 92 percent of the valid votes and therefore cunningly secured his return on The Board, irrespective of the outcome of his contestation. Things did not end there, as Dan Paul contested his right to run for The Board, based on the freshly issued CNVM resolution (he will probably take the contestation to court) and on a number of managerial decisions he did not agree with.

It appears that the conflict at SIF Transilvania was triggered for the purpose of gaining control over the firm by one of the five groups of shareholders who allegedly have amassed stakes ranging between 2-3 percent and 7-12 percent. The battle is fought in the context that a new law regulating capital markets is being drafted. It is rumored that, upon pressure from international financial organizations, the new law would raise the maximum stake an entity can hold in a SIF to five percent, as opposed to the 0.1 percent stipulated by the current bylaws of the SIFs.

Such provision would open the path for one group of interests or another to take control over the SIFs as a preliminary step towards the transformation of these firms into unrestricted private firms, as allegedly recommended by foreign consultants.

In fact, this battle cannot be fought before the year 2005 (when the term of the incumbent management of the SIFs ends) and should not be mistaken for the ongoing clashes that have given a powerful and unexpected "exogenous" boost but are in fact rooted in much older causes. What has happened recently seems to be an accidental intersection between the interests of certain SIF Transilvania shareholders and the political interest to subordinate the firm.

One mention: Sorin Ovidiu Vantu was spotted in Brasov talking to several shareholders near the building where The Shareholder Assembly convened.