Capital Market Commission (CMC) Chairman Stavros Thomadakis rejects criticism that the body has not been exercising adequate control of the market and sounds a warning bell about the capital base of many stockbrokerages. He thinks that the next few months will prove an endurance test for capital markets. In an interview, he advises investors not to be tempted by promises of high-yield investments. A climate of strong suspicion has arisen recently, after the failure of a number of stockbrokerages, that the overseeing authority is not doing its job well? This climate is partly due to an inadequate understanding of the role of an overseeing authority in a free market and the unreasonable expectation that authorities can guide the market or prevent a company’s financial problems. Of course, there are also those who do not like the pressure of supervision and see the CMC as a punching bag. Take the case of the firm Connection, which was suspended from trading last month and has been the subject of much criticism we have received: The firm is facing problems and we ensured that transparency prevailed for investors to be aware. The CMC has no responsibility to check the accuracy of financial statements. Many accuse you of sticking to the formal details and missing the substance. Many have turned this into a slogan. A few years ago, everyone in Greece complained that the market had no rules. Now, we have instituted rules and apply them, which requires consistency, precision and impartiality. Often, a multitude of small violations creates chaos. Besides, sometimes our activities may seem centered on formalities, but for us and the investors, it is of substance – for example, for a basic investor to be sanctioned for not announcing his transactions in good time. I would like to remind people of some of our actions in 2002: We imposed the biggest-ever fines in a single case, totaling 19.5 million euros, in connection with malpractices regarding the Tassoglou stock. We imposed large fines on two foreign houses for abuse of confidential information, again for the first time in the history of the CMC. In the 2001-2002 period, we imposed a total of 2 million euros in fines on listed companies for officially issuing misleading information. These acts sent strong messages that abusive information will be punished. Nevertheless, there is a feeling that attempts are being made to understate problems, so as to prevent the system from being jolted. For instance, the capital adequacy ratios of stockbrokerages are not published. The goal must be to avoid excess and underestimation in evaluating problems. I have repeatedly said that the capital adequacy ratio in the sector as a whole is falling. It is the duty of the overseeing authority to intervene and pressure firms to make the necessary corrections. We do not take away the license as soon as the problem appears, this would not be right and would injure the market. When a firm responds to our pressure, this is what is best for itself, the market and investors. But pressure must be exercised discreetly in order to ensure that a response is feasible. Isn’t it worth noting that in three years of a continuous fall in the stock market, there have been only a few cases of stockbrokerages failing? I can assure you that there would have been a lot more without our intervention. Of course, with the continuing doldrums on the stock market, the potential for failures is rising. But cool-headedness is required to deal with problems. Critics charge that with the Worldwide securities investment firm which went out of business, you did not act correctly. What is your response? This firm’s problem originated in that it assumed an excessive risk in derivatives. It bet on a market recovery which did not arrive. The CMC had indeed begun procedures for revoking Worldwide’s license, but not with respect to its positions in derivatives. Our powers extend as far as controlling organizational, accounting and financial adequacy but not in intervening in managerial decisions. Their positions in derivatives were within the lines of the law. In the end, the firm was unable to provide an additional insurance margin and this is what triggered the revocation of its license. The case proved how comprehensive the systemic protection for the derivatives market is, which was not at all jolted by the Worldwide case. But what about the investors? If the firm’s investing clients knew of its positions in derivatives, which the firm assumed on their behalf, they also assumed the responsibility of the risks from these positions. If they were misled, then there an issue to be investigated by us and the judicial authorities, which we contacted from the first moment. I wish to stress once again that investors must be aware that some circumstances, such as many present promises of high returns, are either misleading or based on high risks. This warning we have issued many times and will not tire of doing so repeatedly.