THE REGULARITY OF THE "PETROM" OFFERING Shrugging at the BSE

With one exception - Mr. Siminel Andrei - the members of the Board of Directors remained silent when asked to express their opinions on the regularity of the "Petrom" Secondary Public Offering.

We hereinafter reproduce the opinion of Mr. Siminel Andrei:

"1. Interpretation of arguments: As a general principle, regulations need to be interpreted as flexibly as possible, to allow for operations which comply with the market requirements. Unfortunately, the case of "Petrom" was processed by the executive of the BSE, which reached mistaken solutions, such as forcing brokerages to "hand over" the clients of the intermediation consortium.

2. The policy of the BSE: The Exchange should have fought for guaranteeing a percentage of the offering for the non-institutional investors (individuals or companies) at a price with a relevant discount (10-15-20%) compared to the price offered to institutional/strategic investors, just like it was done in other countries, in order to support the stock market. Government policies (and the incompetence of brokers) prevented the creation of a strong stock market in Romania, and today, major companies, such as the Proprietatea Fund, are announcing plans to get listed on the Warsaw Stock Exchange."

We can note a hint of discontent in the opinion expressed by Mr. Andrei, who nevertheless avoids making a statement on the regularity of the secondary public offering, approaching it from another, exclusively functional perspective.

However, our questions concerned other aspects:

1) Article 189 of the Law 297/2004 stipulates that a maximum price must be set for the shares in the Offering, if the latter doesn"t include the price and the number of shares offered; even though it does not meet the requirements of this article of the law, because the number of shares of "Petrom" was not stipulated in the Secondary Public Offering, the latter nevertheless sets a maximum price.

What is your opinion on this inadvertence?

2) The Code of the Bucharest Stock Exchange (BVB) stipulates that the subscriptions of the Public Offering need to be recorded in the system of the BSE for the duration of the Offering; however, the Consortium of intermediaries of ongoing public offering of "Petrom" does not enter the subscriptions in the system of the BSE.

What is your opinion on this irregularity?

We sent the two questions to the commissioners of the Romanian National Securities Commission, to the members of the Board of Directors of the Bucharest Stock Exchange and to the members of the Association of Brokers.

The Romanian National Securities Commission gave extensive answers to the two questions (they were published on our July 15th, 2011 issue), outlining interpretations, which, even though we disagree with (as does one large part of the public), are nevertheless clear, and thus encourage a civilized dialogue between the authority and potential investors (who read our paper).

The Association of Brokers reacted, issuing opinions, which we published in our issue of July 18th, 2011) which are rather similar to those expressed by the editorial office of BURSA - namely, that the Offering was inadequately categorized from a legal point of view, and as such, the setting of a maximum price was not required by law, just as the running of the secondary offering of "Petrom" outside the BSE collides with the announcement on its website that it is actually run through the system of the Exchange.

Siminel Andrei is the only member of the Board of Directors of the Exchange who provided us with an answer.

The others have yet to provide a reply.

They didn"t even respond to say that they have nothing to say.

With one exception: there was one member of the Board, who did say that he wasn"t going to answer.

You could say that he was more transparent than the others.

Why haven"t they answered?

We don"t know, because, as they kept silent, we can only make assumptions on their reasons.

We can assume for instance, that the Bucharest Stock Exchange needs its commission from the Secondary Public Offering in Petrom so badly, that the overwhelming majority of the members of its Board of Directors don"t want to say anything about the offering being performed in an irregular manner.

It"s about 700,000 Euros that the BSE would receive if the shares of "Petrom" were to sell at the maximum price.

Quite a lot of money.

Well, it"s "not nice" to take that money, while at the same time saying that you don"t deserve it, because in fact the Offering wasn"t run through the BSE.

So, they just keep quiet.

But, we can assume that the overwhelming majority of the Council of the Exchange remains silent because it doesn"t understand the case.

Lately, the Board of the Exchange has shown that it is very good when it comes to scheming around the elections, but that it is incapable of devising a strategy to grow the Exchange. Which indicates how unqualified they are, so much so, that they would request the decapitalization of the BSE and include it as an item on the Agenda of a General Shareholder Meeting. The initiative belonged to a member of the Board of Directors who is an employee of the famous international company which manages the Proprietatea Fund!

In other words, "crme de la crme"!

Under such circumstances, it would come as no surprise that the members of the Board of Directors, aren"t in fact capable of understanding the subject ...they can only understand trivial issues, such as who gets to be on the Board and who doesn"t ...

But we can assume that, in fact, the issue of the "Petrom" offering doesn"t interest them.

Even though it would seem out of the question, we can"t rule out the idea that the largest secondary public offering ever to take place in Romania isn"t of interest to the members of the Board.

We have to remember that Stere Farmache, the president of the BSE was not present in June, on the occasion of the anniversary of one year since the listing of the Bucharest Stock Exchange.

He had a meeting at the bank where he is a vice-president and couldn"t attend the celebration of the Exchange where he is president.

Let"s remember the missed quorum of the last General Shareholder Meetings of the BSE.

Given these facts, the indifference of the members of the Board of Directors of the BSE concerning the "BSE affair" remains likely.

And finally, let"s remember that on the website of BURSA, an anonymous commenter kept posting a story, about how things allegedly work on the Board of Directors of the BSE, whenever there is a problem: the members of the Board look at Uleia, Uleia looks at Farmache, and Farmache shrugs his shoulders.

With the exceptions of Andrei and Botta.

But Botta is leading one of the intermediaries of the Consortium which is running the secondary offering - it is understandable why he didn"t answer (even though it isn"t acceptable).

Uleia is on holiday, so the others didn"t have anyone to look at.

And Farmache, would just shrug anyway.

Good thing the exchange is growing!