THE FORMER chief executive of bankrupt Nasdaq-listed IT company, AremisSoft Corporation, has agreed to pay the Securities and Exchange Commission (SEC) the staggering amount of $200 million in an out of court settlement. The amount, which, according to the SEC, is one of the highest ever paid by an individual, represents the profit made by chief executive Rois Poyiadjis as a result of the false and misleading information issued by the company from 1999 to 2001.
There is no need to mention that we are referring to the SEC of the United States and not its equivalent – only in name – of Cyprus. Cyprus’ SEC is a toothless and pitifully ineffective institution, which does not have the legal authority to exercise proper control over listed companies. On the rare occasions it has acted tough and imposed hefty fines on public companies and their directors, its decisions have been overturned by the Supreme Court as unconstitutional.
How it was supposed to exercise any authority over public companies when it has not been given legal powers to do so, is a question only our lawmakers can answer. Inevitably, the directors of public companies do not take the SEC seriously as was evident a couple of months ago in the case of Suphire Financial Services, which flatly refused to allow Commission officials into its premises in order to investigate allegations against the company. If the SEC was a powerful body with real administrative muscle, the Suphire directors would not have treated it with such contempt.
The ineffectiveness of Cyprus’ SEC is an indication of how the politicians have been misleading the public over the Cyprus Stock Exchange scam of 1999. While promising to create the legal framework that would protect investors from dishonest businessmen, deputies created a Commission without the legal power to exercise adequate control over directors of listed companies. Nor was it given the legal power to pursue fraudsters in the way the SEC in the US can. Yet we are expected to believe deputies’ promises to put the crooks responsible for the CSE scandal behind bars.
The latest promise is that the government will provide investors with legal aid so they can take class actions against company directors who published misleading information or engaged in price-support schemes. It is doubtful whether anything will come of this initiative, or whether the Attorney-general will bring charges against company directors as had been promised the president himself. The fact that the executive and legislature are happy to have a powerless SEC, incapable of laying down the law, is an indication of how serious they are when they say they will bring those behind the CSE scam to justice.
The other big shareholder of AremisSoft Corporation, Lykourgos Kyprianou, who made as much as Poyiadjis from the sale of shares in the US and also faces charges from the SEC, was the chairman of CSE-listed Globalsoft (the name has been changed now), which was at the centre of many allegations a few years ago. It suffices to say that the authorities have still to investigate them properly.
