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InfoBusiness Romania - online guide
Capital markets

Legal background

The foundations for the organizing and functioning of the capital markets in Romania, with the institutions and operations specific to such markets, were laid out in 1994 pursuant to Parliament's passing of Law no. 52/1994 regarding securities and stock markets.

To reach the objective of Romania's integration into the European Union and the alignment of the Romanian legislation to the standards of the directives of the European Union, the Parliament initiated a reform of the legislative background applicable to the capital markets.

In April 2002, the Romanian Government issued Emergency Ordinance no. 28/2002 regarding securities, financial investment services and regulated markets, which completely annulled the old regulation applicable in this field. The Emergency Ordinance no. 28/2002, as Law no. 525/2002 approved it with amendments and supplements, currently represents the basis of the legal framework on securities.

This ordinance regulates the establishment and functioning of the markets for financial instruments, with the institutions and operations specific to such markets, under the strict supervision of the National Securities Commission (CNVM). The amendment of the legislative background in the field of securities contemplated the establishment of strict rules for the organization and functioning of the regulated markets, of conducting transactions on these markets and in increased conditions of transparency and protection for the investors.

The provisions of the ordinance regarding securities are supplemented by the regulations and instructions issued by the CNVM and the normative acts issued by the bodies with duties in the securities field.

The National Securities Commission (CNVM)

The CNVM was established by Law no. 52/1994 regarding securities. Following the same rationale for reforming the normative background of securities, the Romanian Government approved by Emergency Ordinance no. 25/2002 the Statutes of the CNVM, which fully abrogated the old regulation.

The CNVM is an autonomous administrative authority with legal identity, operating on a national level and subordinated to the Romanian Parliament.

The scope of the CNVM is to set and maintain the framework necessary for the development of regulated markets, to ensure the protection of investors and operators against unfair and abusive practices, to promote the fair and transparent functioning of regulated markets, to prevent the handling of markets and frauds, to set the standards of financial solidity and honest practice, to adopt the measures necessary to avoid the occurrence of systemic risk on regulated markets and to prevent the affecting of the equality of information and treatment of the investors or their interests.

In exercising its duties, the CNVM issues regulations and instructions that set forth norms and rules regarding the application of laws specific to the capital market, the regulated markets of merchandise and derived financial instruments, the bodies for collective investment, as well as the institutions specific to the same.

Within the CNVM there is a private office for the recording of securities (OEVM) to which all necessary information regarding securities and the issuers of these securities is transmitted, issuers that fall under the provisions of the ordinance regarding securities, as well as information regarding all other individuals and legal entities subject to the commission's supervision.

The regulated markets

Involved public institutions are authorized to sell the shares of the companies that are subject to privatization, through one of the following methods:

Common rules applicable to the regulated markets

Only participants authorized by the CNVM may operate on the regulated markets. The conditions for obtaining and maintaining the capacity of member of a regulated market or the capacity of another type of participant are set out by the respective regulated market, through its own regulations authorized by the CNVM.

Only securities and other financial instruments registered with the OEVM are admitted on a regulated market. Also, to be transacted on regulated markets, securities and other financial instruments must ensure equal access of the investors to information.

Operations on the regulated markets

The category of securities that may be transacted on the regulated markets was extended by including other types of securities not regulated under the old legislation. Consequently, shares, state titles, bonds issued by the central or local public administration and companies, as well as other loan titles with a due date over one year, preference rights upon the subscription of shares and rights of conversion of claims into shares, other financial instruments qualified by the CNVM as securities, are all transacted on the regulated markets.

Any operation of sale, purchase, exchange, as well as any other ownership conveying operation, any conversion or exercise of a right having as subject securities or other financial instruments created with respect to the securities issued by publicly held companies, shall be carried out solely on regulated markets and through the companies for financial investment services or other brokers authorized by the CNVM. The operations that are exempted from this rule are expressly provided under the law.

All operations carried out on the regulated market are to be compulsory discounted through a discount system authorized by the CNVM.

Public offers issued by non-residents in compliance with the conditions provided under Romanian law may be conducted on the Romanian market. Any public offer referring to securities that are subject to the ordinance regarding securities and that are carried out by residents outside of Romania must be notified to the CNVM.

Stock exchanges

The markets regulated as stock exchanges are set up and function as public institutions with legal identity, under the decision of establishment and the functioning authorization issued by the CNVM.

The monitoring and control of the stock exchanges is done by the CNVM through the general inspector of the stock exchange, who ensures the strict and full compliance with the provisions of the provisions of the relevant legislation in this field.

The new regulation provides a series of minimum requirements that a publicly held company must meet to be listed on a stock exchange:

- To have an anticipated stock exchange capitalization of at least EURO 1 million, converted in ROL, or a share capital representing the ROL equivalent of at least EURO 1 million, inasmuch as the value of the stock exchange capitalization cannot be anticipated;

- To have functioned during the last three years prior to the listing and to have published annual financial records for this period;

- To have a minimum of 25 percent of its shares publicly held.

Currently, there exists only the Bucharest Stock Exchange (BVB), established in 1995.

Other regulated market

The regulation of other markets under the new legislation applicable to securities is intended to ensure real transparency, as well as increased protection for the investors on such markets.

The regulated markets, other than stock exchanges, are set up exclusively as joint-stock companies, and the minimumcapital of the same is regulated by a CNVM regulation.

According to the new regulation, at least two thirds of the share capital of a company representing a regulated market must be held by the companies for financial investment services, which companies become members of such market. A shareholder of a company representing a regulated market may not hold either directly or through affiliated persons, more than 5 percent of the shares of such market.

The authorizing of the establishment of a regulated market requires fulfillment of certain operational conditions regarding the method of organization, the management, the transacting process and the process of conclusion of transactions, the monitoring and control of the operations on the respective market, as set out by the CNVM regulations.

The regulated markets must ensure compliance with the norms regarding the transparency and the protection of the investors through the distribution of all information to investors, companies for financial investment services and other interested parties.

Currently, the only functioning over-the-counter market is S.C. RASDAQ, organized and functioning according to the model of the NASDAQ market in the United States. The RASDAQ market was established in 1996 to transact shares resulting from the mass privatization process. Pursuant to the amendment of the legislative background, the regulated market RASDAQ was to become a regulated market, as provided by the ordinance regarding securities, within a maximum of 12 months following the enforcement date of the new normative act S.C. RASDAQ SRL was transformed in a joint-stock company (S.C. RASDAQ S.A.) in April 2003.

The protection of the investors

The ordinance regarding securities imposes a number of special rules for the purpose of increasing the protection of investors on the regulated markets.

Publicly held companies are obligated to demand a regulated market to bring in issued securities on said market for transaction purposes, within one month following the obtaining of such status. Also, publicly held companies are obligated to register with the OEVM and to comply with the reporting requirements regulated by the CNVM.

The convening of general meetings, access of the shareholders to information regarding the company, the appointment of the members of the board of administration, the company's conclusion of documents with a valuable consideration exceeding a certain value, as well as other activities carried out by publicly held companies must observe the conditions expressly provided under the law.

In-kind contributions to the increase of the share capital of a publicly held company are forbidden.

Any person who acts on his/her own or jointly in order to obtain the position of significant shareholder (holding 10 percent of the share capital of the issuer or of the total voting rights) or of controlling shareholder (holding one third of the share capital of the issuer or of the total voting rights) is obligated to perform a public offer for purchase of the respective securities.

Any person who acts on his/her own or jointly in order to obtain the majority position (any participation in the capital that confers upon such persons more than half of the total voting rights in the general meeting or sufficient voting rights as to appoint and revoke the majority of the members of the board of administration and censors of the issuer) or the absolute majority position (any participation to the capital that confers upon such persons more than 75 percent of the total voting rights in the general meeting or sufficient voting rights as to appoint and revoke all members of the board of administration and censors of the issuer) is obligated to perform a public offer for the takeover of all shares of the respective issuer, which shares are in circulation.

Companies for financial investment services

The new regulation gives up the terminology of securities companies and replaces it with the notion of companies for financial investment services.

The companies for financial investment services are Romanian legal entities, established in the form of joint stock companies, issuers of nominative shares, and which function according to authorization and under the supervision of the CNVM. These companies must have as their exclusive object of activity the carrying out of financial services and the supply of evidence of a minimum subscribed and paid in capital, in compliance with the legal provisions.

In conditions of reciprocity, the companies for financial investment services with headquarters in a different country may render financial investment services in Romania through branches established for this purpose, with the authorization of the CNVM.

Such companies may also render financial investment services in Romania in a direct manner, with the authorization of the CNVM on the basis of a cooperation agreement to this effect, concluded between the CNVM and the competent authority of the respective country.


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