The SIFs want to take the matter of the BSE in their own hands

The Board of the Bucharest Stock Exchange, which will see its term expire at the end of last year, has all of a sudden remembered, one year and a half late, that in April 2013, the shareholders of the BSE have approved, at the request of SIF Moldova, giving the management the mandate to propose in the next general shareholder meeting the amendment of the Articles of Incorporation of the Exchange, to change the management structure from a one-tier to a two-tier one.

Therefore, the shareholders of the BSE have been summoned on October 28th, to approve the amendment of the Articles of Incorporation, so that the company would be led by a Supervisory Board, made up of seven members, and a Directorate, made up of three members.

In the "Final and Transitory Dispositions" of the proposed bylaws, it is stated that the CEO becomes president of the Directorate, and the members of the Council of the Stock Exchange, become the members of the Supervisory Board.

That paragraph seems to be meant to automatically appoint the current CEO, Ludwik Sobolewski, as head of the directorate, as the term of the Board of Directors is nearing its end anyway, and the nine members can not all fit on the seven seats on the Supervisory Board, no matter how much they wanted to.

The document does not specify the duration of the terms of the "transitional" managers.

The Articles of Incorporation, in their proposed form, clearly state that the Directorate is appointed by the Supervisory Council, which can also revoke it.

Some are saying that Sobolewski's place at the helm of the BSE is at stake, as the SIFs seek greater influence over the Bucharest Stock Exchange, while other claim that he is negotiating the keeping of his position and that he would have valuable allies.

At any rate, several voices in the market say that the contract of the CEO should be renegotiated, in line with the their new duties.

According to the Articles of Incorporation, setting the compensation of the members of the Directorate is the responsibility of the Supervisory Board, and the amounts are within the limits approved by the Ordinary General Shareholder Meeting.

Some sources say that the outcome of the elections of the BSE is not yet set, as the SIFs have a heavy influence on it, having already shown their might in the elections at the Central Depository.

Also, the market expects a move from the Financial Oversight Authority, which has repeatedly said that it would eliminate the dispositions concerning the incompatibilities between stock market jobs. if this happens before the elections of the BSE, then the SIFs could show up with first-line contenders for the fight for the Supervisory Board of the BSE.

• Costel Ceocea: "We support two-tier management"

Costel Ceocea the CEO of SIF2 Moldova said that SIF Moldova was one of the first shareholders which requested for the BSE to adopt a two-tier management system, back when the previous elections for the current Board of Directors of the BSE were held (when the "goals" were set for the Management Contract upon the appointment of the Managing Director of the BSE), and he added that he supports this proposal.

He told us: "The recent postponement of the upgrade of our stock market to emerging market status worries us. The shareholders need to have a firm and explicit attitude. The example of the General Shareholder Meeting of the Central Depository shows that the shareholders can mobilize when it comes to important issues".

According to him, the ASF will need to clarify the incompatibility aspects, generated by conflicts of interest.

In the opinion of the SIF2 chairman, the Directoral Council must come up with a clear strategy, which the shareholders must assume.

"The competence and the consistency of Ludwik Sobolewski show that, in any management formula, there can be one of the members that any team would need", said Costel Ceocea, in discussing whether the current BSE CEO would keep his job.

The SIF2 CEO notes some lapses in the draft articles of incorporation, proposed by the BVB, such as the fact that it contains no provisions concerning the election of the chairman of the Supervisory Board. Still, law 31 specifies the fact that they would be elected by the other members.

According to Mr. Ceocea, the articles of incorporation stipulates that the members of the Directorate may not be shareholders, administrators, agents, internal auditors of a brokerage firm, but make no mention concerning the incompatibilities with the administrators of other collective investment entities or alternative investment funds.

• Fercală: "The Stock Exchange must set an example"

Mihai Fercală, the executive chairman of SIF3 Transilvania, subscribes to the notion of the dual management of the BSE. He told us: "The Stock Exchange must be the one to set an example. Two-tier boards are much more in line with the principles of corporate governance than one-tier boards. I subscribe to this idea".

SIF Transilvania is one of the biggest shareholders of the Bucharest Stock Exchange, with a holding of 7.17%, according to their first semester report.

Iulian Stan, the vice-president of SIF3 Transilvania, announced that SIF3 wants a long term partnership with the Bucharest Stock Exchange, without concretely explaining what such a partnership would look like.

Over the previous elections, the holding limit in the Bucharest Stock exchange has been raised to 20% and a new player has shown up - the EBRD which has acquired last year 5% of the shares of the BSE.

SIF2 Moldova and SIF5 Oltenia hold 5% of the BSE each, while SIF4 Muntenia holds 4.32%, according to the mid-year reports.

Adina Ardeleanu