THE FAILURE OF THE GENERAL SHAREHOLDER MEETING OF THE BSE Small brokers, big muscles

The tariffs of the BSE for brokerages will remain unchanged, following the failure of the management of the BSE, which was unable to get enough brokers together to meet the quorum of the general shareholder meeting, whose main item on the agenda was the validation of the newly proposed tariffs.

The management of the BSE was considering the introduction of a flat monthly fee of 3,500 lei for brokerages, a measure which the Association of Brokers criticized, claiming that it would place smaller brokerages at a disadvantage compared to the bigger ones.

For the entire market community, this failure is telling (only 40.15% of shareholders were present, while the required quorum was 50%).

The new management of the BSE had the backing of the major brokerages, which are generally backed by banks.

But the general shareholder meeting presented yesterday revealed that they do not hold the majority - the independent brokerages (meaning those that are tied to a bank with an "umbilical cord") did not attend the meeting, which means that the quorum wasn't met.

In fact some of them were there, but refused to register. They just came in as "observers".

A strong signal to the other brokerages that they can't decide the policy of the BSE on their own and probably, a way of showing the current management that they don't like it and that it didn't even have the majority in the elections held one year ago (January 9th, 2012).

The cumulated number of votes received at the time by Stere Farmache and Dan Paul exceeded those received by Lucian Anghel for the position of chairman, and the latter won because the remaining independent brokerages could not agree on a common platform, some voices were saying today outside the meeting.

Yesterday, the smaller brokerages, which held an "informal" meeting in the lobby of the hotel, were apparently ready to enter the General Shareholder Meeting, only if the quorum was met, to avoid missing the vote on the agenda.

Even though the meeting had been scheduled for 10 o'clock, the organizers of the General Shareholder Meeting would have wanted to wait for one more hour, before beginning the meeting, in hopes that they could get more shareholders to come in at the last minute.

A little before 11:00, however, Dan Paul, the president of the Association of Brokers and vice-president of the BSE, asked for the quorum to be recorded, because the law does not stipulate how long to wait, but rather that the meeting should begin at the scheduled time.

The finding that the meeting could not be held, put the victory on the side of the small brokerages.

Yesterday morning, the management of the BSE was hoping that it would be able to hold the Extraordinary General Shareholder Meeting, even though all the four other attempts have failed, so far.

The management of the BSE considers that a new Articles of Incorporation and a new pricing policy would have taken the Bucharest Stock Exchange into a period of normalcy and helped modernize it.

In February, both the president of the BSE, Lucian Anghel, and the General Manager, Victor Cionga, were saying that they were aware that the proposal of a new tariff policy would not please everybody.

"We are aware that we can't please everybody. We have a debt towards shareholders, and this measure would be in their interest, as well as in the interest of the stock market", said Lucian Anghel, in February.

But yesterday's General Shareholder Meeting proved to Anghel that far from simply "not pleasing some people" , it would actually "displease many ".

Now, the Board of the BSE may consider moving the items on the Agenda of yesterday's General Shareholder Meeting to April's assessment meeting.

• Criticism of the activity of the BSE, saved for the Assessment General Shareholder Meeting

Aside from the supporters and the opponents of the BSE, some of the shareholders had come to the General Shareholder Meeting yesterday to express their unhappiness with the management of the BSE, under the leadership of the new Board of Directors, elected on January 9th, 2012. Others had just come in to "mingle".

One shareholder told us that some of the proposals on the agenda prove that those who summoned the General Shareholder Meeting are not well acquainted with the provisions of law 31 of the retail companies. The shareholder question gave one such example: the request that some of the functions of the Extraordinary General Shareholder Meeting be transferred over to the Ordinary General Shareholder Meeting. "There is no reason to transfer the competences from the Extraordinary General Shareholder Meeting to the Ordinary one, because the latter already has every possible function it can have, of course, as long as they are legal or set by the shareholders", the shareholder in question said.

In the lobby, people also talked about the topic of a "sale & lease back contract" for some vehicles of the BSE, which had no justification, according to some, because such contracts are only used when the company needs cash, whereas the BSE does not have that kind of problems. Some of the shareholders suspected the people who decided on that operation of being ignorant, which would not be excusable, or even worse, of having concluded those contracts legally.

Some of the shareholders also complained about the fact that Victor Cionga hired several people as advisors, after he took over the position of General Manager, as some voices were saying, through "personnel leasing", even though some claim that he used this trick to avoid the restriction placed on increasing the number of employees of the BSE.

Others however, have no issue with the number or the salaries of the advisors, but instead, they feel that their activity needs to be reevaluated.

Victor Cionga has introduced his advisors at a BSE conference held in February. He mentioned Dragoş Simion, Gabriela Onţică, Corina Mocanu and Liviu Moldovan and he said that the BSE now has a Human Resources manager.

Commenters on the sidelines consider that the appraisal General Shareholder meeting which will be held in April, will be a good opportunity for the shareholders which are unhappy with the management to state their complaints. Moreover, some voices are saying that an attempt to overthrow the management can not be ruled out, depending on how the "negotiations" between the shareholders will play out.

It would seem that the role of the two SIFs which hold 5% of the BSE each - SIF Moldova and SIF Oltenia - could be crucial.

Tensions, voices, opinions, interpretations...

The fact is that the tariffs of the BSE will remain unchanged.