The BSE, required to take action in the case of stock trades managed by the AVAS

• Market sources claim that the Exchange may have to cancel the trades by which a brokerage firm sold shares of "Biofarm" and "Mercur" Craiova, as part of the foreclosure of AVAS

The scandal which began on the Romanian stock market is entering a new stage. Everything began when court appointed liquidator tried to sell on the Bucharest Stock Exchange several blocks of shares which the AVAS owned in several companies, having been granted the right to foreclose on the AVAS by way of a court ruling.

This time, via an Ordnance of the Romanian National Securities Commission, the Bucharest Stock Exchange (BSE) was forced to intervene and take the measures "needed", under the claim that the sale of shares owned by the AVAS in "Biofarm" Bucharest (BIO) and "Mercur" Craiova (MRDO) via special orders violated provisions of the Code of the Exchange. The trades were brokered by "Oltenia Grup Invest".

The Romanian National Securities Commission (CNVM) has already suspended the settlement of the trades involving 1.74 million shares of BIO and 6,000 shares of MRDO, as well as the execution of any other sales of shares by the court appointed liquidators in other listed companies managed by the AVAS.

The ordinance of the Romanian National Securities Commission stipulates that the aforementioned trades violate article 228 of the Code of the BSE, which specifies the requirements for performing a sale of shares through special orders.

Still, the Ordnance does not clearly specify which measures the BSE should take in the case of the deals involving shares in BIO and MRDO, leaving it up to the BSE to decide. The document stipulates that the BSE needs to do this "right away", which hints that the action must be followed urgently.

Even though the Ordnance has certain ambiguous parts, it seems that the Romanian National Securities Commission expects the BSE to "grab the bull by the horns" and to cancel the trades with the shares of BIO and MRDO, as well as sanction the brokerage which intermediated the deal.

"The Exchange shouldn"t have allowed these trades to take place from the very beginning, since they are illegal", sources who did not wish to be named said. They added: "It is the Stock Exchange which allowed those people to sell the shares in Biofarm and Mercur, so it is its duty to act accordingly. It is true that someone paid for those shares, and that the buyers saw their funds frozen, but we can"t validate those trades just because someone already paid for those shares. The conditions for the sale of shares via special orders are stipulated in the Code of the BSE".

Article 228, paragraph 1 of the BSE code, stipulates that the sale of stocks by special orders is used in the case of blocks of shares equal to or greater than 5% of the company"s shares, or having an equivalent value of at least 500,000 Euros. Paragraph 3 of the same article provides as exemptions from these provisions for "public institutions involved in the privatization process for securities which are the object of methods of sale, others than public offers, stipulated in special laws concerning privatizations, as well as the execution of the security interest agreements which have stocks traded on the BSE as their object".

The CNVM has shown, however, that SSIF "Oltenia Grup Invest" has erroneously claimed that the AVAS was behind the sale of BIO and MRDO stocks (and others) and that it provided inaccurate grounds for the request based on which these operations were based on.

The Ordnance of the CNVM states that "The AVAS was not involved in the process for the privatization of the blocks of shares which had been put up for sale", as well as the fact that the trades involving the two stocks, "didn"t represent the foreclosure of security interests which had the shares in question as their object".

The Ordnance also states that "Oltenia Grup Invest" had all the necessary information concerning the foreclosure of the AVAS and was also aware that it wasn"t the orders to sell the stocks hadn"t been issued by the AVAS.

By the closing of the edition, the officials of the BSE had not yet offered an answer on the measures that the Bucharest Stock Exchange was required to take in this case.