The Rasdaq, a paradise for market abuse

The notion of "market abuse", which defines some of the gravest offenses of the capital market, does not apply to trades concluded on the Rasdaq tier, Cristian Duţescu of law firm "Duţescu şi Asociaţii" said yesterday, at a conference that he organized together with the Romanian National Securities Commission which concerned the delineation and clarification of the legal framework that is applicable to market abuse.

"Market abuse" is regulated by the law on capital market, and includes, among other things to insider trading and market "manipulation".

"European directives determine that the legal regime of market abuse only applies to the regulated markets, but that does not mean that the member states of the European Union can"t adopt provisions that would extend market abuse to apply to unregulated markets such as the OTC", Cristian Duţescu said yesterday.

The attorney yesterday argued in favor of extending the provisions of market abuse to trades concluded on the Rasdaq segment, which has an uncertain status at the moment, as the official institutions able to do so have cautiously avoided to state clearly whether the Rasdaq is considered a regulated market. The attorney claims however that the provisions of market abuse should not apply completely to the less liquid companies of the Rasdaq, which trades once every three months and which see their quotations fluctuate wildly.

"It is difficult to impose the legal regime of market abuse to those illiquid stocks that are traded very rarely and where price experiences sudden fluctuations. The application of the provisions of the law should be applied so as to increase investor confidence, not to hinder trading", said Duţescu.

The Rasdaq tier is not one of the regulated markets that the CNVM reported to the European Commission until now, unlike the derivatives market of Sibiu, the spot market of the Bucharest Stock Exchange or the Romanian Commodities Exchange.

Even though the CNVM seems to have its hands tied behind its back in the case of "suspicious" trades on the Rasdaq, Bogdan Chetreanu, commissioner of the CNVM, yesterday assured investor that the institution carefully monitors everything that is happening on the Rasdaq.

"We have decided to treat the Rasdaq like a regulated market until the legal status of this tier will be clarified. We are watching it closely and we won"t let anything happen", Chetreanu said, and he added that the status of the Rasdaq market is a far too delicate matter to be solved in a rush.

The most recent market abuse scandal is the one in which several shareholders of Banca Transilvania were accused of market manipulation. At the time, the CNVM considered that the accused traded TLV stock using insider information, but the prosecutors of the DIICOT had a different opinion, claiming that their actions represented manipulation of the capital market.