The stock market regulators failed their own evaluation

The ASF has levied harsh sanctions against "Harinvest", after discussing, in today's meeting, about the audit of the brokerage firm of Vâlcea, in November.

According to some sources, the ASF has withdrawn the license of "Harinvest" and has prohibited it on from operating on the stock market.

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The Board of the Financial Oversight Authority (ASF) has made its plan to issue a verdict and to take action this week, in the situation involving "Harinvest", the broker accused by clients of leaving them without stocks and money in their accounts, after it ran out of money to settle the trades involving structured products.

It would seem however, that the Authority will also review the activity of its executives in charge of the supervision activity, which wasn't exactly lacking in mistakes. As a result, tensions run high at the headquarters of the ASF.

The question on everybody's mind is how it was possible for "Harinvest" to resort to sell-outs for a year, without raising any red flags.

Just as it likes to say in its sanctions of market participants, the ASF "could have and should have" prevented a new "Sima" case.

According to some market sources, the ASF was repeatedly notified by the Bucharest Stock Exchange and the Central Depository, that "Harinvest" would frequently use sell-outs, operations which were supposed to be exceptional.

The fact that the Authority received false reports from "Harinvest", like some people say, represent extenuating circumstances for the former, but it doesn't excuse the fact that they didn't do anything until the situation became serious and there was nothing else to be done.

Apparently, according to some sources, the BSE actually wanted to suspend "Harinvest" in the beginning of the year.

The representatives of the Bucharest Stock Exchange did not respond on Friday, whether it was true that the BSE notified the ASF concerning the atypical behavior of "Harinvest" and the response they received, whether the Board of Directors of the BSE intended to suspend the activity of the brokerage firm and on what grounds, nor whether it started an internal investigation to see whether there are any people within the BSE that did not carry out their oversight duties.

On specific questions, the BSE sent us a general answer: "The BSE mentions that it generally notifies the ASF concerning the activities and trades it considers suspicions".

Since the creation of the ASF, through the merging of the former CNVM, CSA and CSSPP, the Authority has a integrated supervision department, which needs to monitor the systemic risks, and the situation of "Harinvest" has revealed precisely the fact that the current oversight system has deficiencies.

The integrated oversight must provide the unitary framework for monitoring the operational and systemic risks, in terms of the processes, people and systems.

In other words, the ASF must undergo an evaluation itself and take internal measures to prevent similar situations in the future.

For now, aside of suspending the operations of "Harinvest" for three months and fining it, the only things that the ASF has announced is that it is analyzing and investigating the situation and that it will let us know the results of its findings whenever it deems it adequate.

• The number of victims, on the rise

The number of the victims of "Harinvest" has reached 41, according to some market sources, and their updated list is being sent to Anca Dumitru, the deputy CEO of the BSE and to Cătălina Sava, the head of the oversight department for the stock market of the ASF.

• An employee of BCR, fired as a result of the "Harinvest" case

The case of "Harinvest" has now spread to BCR and SSIF Broker, brokerage firms which were the counterparties to the sell-outs initiated by the broker of Râmnicu Vâlcea.

The representatives of "Harinvest" stated, in a press release, that the blame for the losses suffered by their clients lies with one of their employees, with the cooperation of BCR and SSIF Broker, and that the two brokerage firms earned a lot of money as a result of their trades with "Harinvest".

The representatives of BCR and SSIF Broker defended themselves on, claiming that the issues of other brokerage firms are exclusively their own responsibility.

Still, BCR changed its stance, on Friday and said that following an internal audit, it has fired one of its employees, after it realized that the employee in question has violated the procedures. The representatives of BCR stated: "The bank has notified the authorities and has quickly conducted internal investigations, taking steps against any violations from its procedures and those of the group, maintaining a strict operating standard. An employee that has violated all these procedures, has been let go. The bank has cooperated and will continue to cooperate with the authorities in the investigation of this case".

The ASF has not yet announced whether it has extended its investigations to BCR and SSIF Broker.

Some market voices claim that the people who are truly responsible for the losses of "Harinvest" will not be punished, considering that the shareholders of the firm have political connections.

The shareholders of Harinvest are Valentin Cismaru, with a stake of 23.04%, Veronel Lungu (30.86%), Dumitru Crăciunescu (23.04%), Ion Antonescu (23.04%).