Warsaw Stock Exchange improves compliance culture
The WSE has established itself as the hub for CEE capital and bond markets.
The Warsaw Stock Exchange (WSE) is initiating significant measures to improve the compliance culture in local capital markets, the president of the WSE, Adam Maciejewski, said at a conference at the WSE March 31.
“During the last two years significant initiatives were taken in order to improve markedly the trust of investors and the compliance culture itself at the national stock exchange,” Maciejewski said.
Under Maciejewski’s leadership, the Warsaw Stock Exchange has rebounded strongly in recent years. His predecessor was removed by shareholders following a wave of criticism in the media and allegations of unethical practices.
NewConnect
An early signal of intent was the clean-up of the NewConnect market, an alternative share market for smaller companies. NewConnect’s reputation had been diminished by a number of “empty” companies on the market, as well as by a number of several high-profile failures in oversight.
In one prominent case, the founder and majority shareholder of NewConnect-listed firm Progres Investment, Pawel J., was accused in 2001 of fraud and money laundering. The Central Bureau of Investigation began investigating Progress Investment in March 2012, following allegations of fraud. Questions were then raised about oversight at NewConnect, as Pawel J. had worked as president of the company from its debut on the market in August 2011 to July 2012.
Another case was that of Widok Energia, which was removed from NewConnect after the Gdansk Prosecutor’s Office uncovered evidence of wrongdoing by the company. Widok Energia had allegedly submitted inaccurate statements about its financial position in order to obtain loans, as well as falsifying the declarations and protocols of its supervisory board.
Penny Stocks
The WSE has likewise focused on removing so-called “spolki groszowki” [penny stocks] that have been listed on the stock exchange for long periods of time without showing any sign of operations. Such companies are an inherent risk of becoming conduits for money laundering or other illegal activities.
From April 1, about 30 companies with share prices of less than PLN 0.5 will disappear from WSE indices. These companies were added to an “alert list” by the WSE board: Advadis, Intakus, Regnon, Skystone Capital, Ideon, KCI, Euroimplant, Miraculum, IDMSA, Mewa, Mostostal Export, Polimex Mostostal, Clean & Carbon Energy, Budopol, Chemoservis Dwory, NFI Magna Polonia, PPG, Sanwil, One-2-One, Petrolinvest, Ecard, Prochnik, Impera, Invista, Rubicon Partners, Point Group, Zremb, Fast Finance, ERG, B3 System, according to TVN24bis.
Rating Agency
Also in line with the reform agenda is the creation of a new bond rating agency, which will increase the level of trust and transparency in the corporate bond market, as well as “greatly reducing the risk of investing in bonds on the WSE,” according to Maciejwski. The rating agency will also support small to medium sized companies to issue bonds – a tool, which has not been open to them due to the traditional lack of transparency in in this sector.
“It is important that the agency has a good reputation and no conflicts of interest – ratings should not be funded by the issuers themselves.” Maciejewski said in an interview the Polish daily Gazeta Wyborcza. “We want the agency operational as soon as possible, even this year, although the licencing process will take some time.”
The WSE first announced its intention to create an independent rating agency in 2012, according to the Polish business daily Wyborcza.biz, but the plan is now being pushed forward with a new urgency.
