Romanian Capital Market Regulatory Framework

ALPHA FINANCE ROMANIA S.A.

Brief presentation

 

Key regulations

The legislative framework of the Romanian Capital Markets consists of the following Laws and Regulations:

• Capital Market Law (Law 297/2004);
• Companies' Law (Law 31/1990);
• CNVM instructions & regulations;
• Bucharest Stock Exchange regulations;
• Privatisation laws.

The legal framework for securities trading was first put in place in 1994, leading to the establishment of the Romanian National Securities Commission (CNVM), the organisation and functioning of the Bucharest Stock Exchange (BSE), the issuance and trading of securities, as well as the regulation of brokerage activities of intermediaries and investment advisors. As a consequence, effective securities trading started in November 1995 on the Bucharest Stock Exchange and one year later on the over-thecounter Rasdaq market.

Over the past ten years, the governing law on the Romanian capital market experienced numerous changes, which culminated in a new, consolidated capital market law that was enacted on June 29th, 2004 and came into force one month later.

The new Capital Market Law (Law 297/2004) aims at bringing the Romanian capital market in line with European standards. While the new law outlines only the general principles, additional secondary legislation was elaborated by the regulatory body CNVM. In addition, given Romania's accession to the EU starting January 2007, CNVM published Regulation no. 31/2006 that provides for the enforcement of the followingEuropean Commission Directives, starting January 2007:

a) Directive 2006/49/EC on the capital adequacy of investment firms and credit institutions.

b) Directive 2004/109/EC on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC.

c) Directive 2004/25/EC on takeover bids.

d) Directive 2004/72/EC implementing Directive 2003/6/EC as regards the accepted market practices, the definition of inside information in relation to derivatives on commodities, the drawing up of lists of insiders, the notification of managers' transactions and the notification of suspicious transactions.

e) Directive 2004/39/EC on markets in financial instruments.

f) Directive 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC.

g) Directive 97/9/EC on investor-compensation schemes.

h) Directive 85/611/EEC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS).

i) Directive 14/2007 laying down detailed rules for the implementation of certain provisions of Directive 2004/109/EC on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market enforced in Romania by CNVM Regulation no. 1/2008.

j) Directive 16/2007 implementing Council Directive 85/611/EEC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) as regards the clarification of certain definitions enforced in Romania by CNVM Regulation no. 2/2008.

Moreover, the following European Commission regulations are applicable in Romania:

■ EC Regulation no. 2273/2003 on the implementation of EU Directive 2003/6 regarding the exceptions on the redemption and stabilization activities;

■ EC Regulation no. 809/2004 on the implementation of EU Directive 2003/71 regarding the information that should be presented into a prospectus and also the form, publication, dissemination and other requirements regarding the public offerings;

■ EC Regulation no. 1787/2006 and no. 211/2007 amending the EC Regulation no. 809/2004;

■ EC Regulation no. 1287/2006 on the implementation of EU Directive 2004/39 as regards record keeping obligations for investment firms, transaction reporting, market transparency, admission of financial instruments to trading;

■ EC Regulation no. 1606/2002 on the application of international accounting standards;

■ EC Regulation no. 1725/2003 adopting certain international accounting standards in accordance with EC Regulation no. 1606/2002.

 

Key regulators

The National Securities Commission ("CNVM" in Romanian) is the main regulatory body, which supervises both securities markets and the derivatives market. The Commission was established in October 1994, as an independent administrative authority accountable to the Romanian Parliament.

CNVM is comprised of seven commissioners (appointed by the Parliament) who constitute its management board. The commissioners have five-year mandates, which can be extended only once.

CNVM has an equivalent role to the one of the American SEC in regulating the functioning of the Romanian equity markets. It is responsible for the all operations on the Romanian securities markets, the protection of investors against unfair, abusive, and fraudulent practices, the circulation of information regarding securities, holders and issuers, and the establishment of a legal framework for financial services activities. In order to protect the investors' interest, the Commission has the right to apply sanctions for the breach of the provisions of the laws and the regulations issued for its implementation. Sanctions may range from fines to withdrawal of authorization. Listed securities cannot be traded outside regulated markets, which are those established under the authority and the supervision of CNVM.

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Legal updates

25 Februarie 2010 Legislative Summary - January 2010 19 Februarie 2010 Certification of annual profits tax returns 5 Februarie 2010 State Budget and State Social Security Budget for 2010 Laws 5 Februarie 2010 Changes brought to certain VAT statements 5 Februarie 2010 Draft amendments to the Fiscal Procedure Code 29 Ianuarie 2010 Certification of the annual tax returns by a tax consultant 29 Ianuarie 2010 Fiscal regime for micro-enterprises

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