On January 12, 2001, the five-year term of the Securities and Exchange Commission drew silently to a close.

Since its establishment in 1996, the commission has served an important function within Bulgaria's economy, reviewing and evaluating proposed tender offers by the country's business community. When a company seeks to increase its stake in one of its investments, the SEC often mediates the proposed transaction.

According to the legal framework regulating trade in securities, the SEC must issue a ruling on tender offers within 30 days. If such a ruling is not delivered within the deadline, the position of the SEC is assumed to be one of silent approval.

According to the Law on Securities and Stock Exchanges, the Ministry of Finance should assign commission members. However, due to the Ministry's inaction over the past two months, no new commission has been established. As a result, the body that is required by law to defend investor interests has had its hands tied.

Without the existence of a regulatory body like the SEC, proposed transactions become more problematic.

On March 5 and February 22, the majority owners of Mayak AD and Agropolychim AD, public companies traded on the Bulgarian Stock Exchange, announced separate tender offers to increase their stake in their investments. Although a fairly simple procedure, the absence of the SEC complicates the transaction, and opens the door to speculation about the fairness of any offering.

"Using the DCF valuation method, we think that the fair price of the company's shares (Mayak AD) is around $1.29, over twice the price offered," wrote Stanimir Sarastov, Equity Analyst at Stancioff & Sevlievski, in a research report.

"In the case of Agropolychim, we estimate the fair price of the shares at nearly 10 times that in the tender offer," said Sarastov.

Ideally, the SEC would have been the arbiter in these two incidents to rule on whether the tender offers were legitimate and fair. But with the arbiter missing, there is no body in place to confirm the validity of a transaction, and allay fears of impropriety.

The troubles surrounding the SEC stem from poor lawmaking. "The Law on State Administration requires that the Chair of the SEC has 25 years of experience in government administration, while the remaining SEC members have 21 years of experience. Since the stock market was established just a few years ago, it is virtually impossible to locate such qualified persons," said Olga Raeva from the Ministry of Finance Press Centre.

The government has promised to solve this SEC riddle. According to SEC officials, Muravei Radev, Minister of Finance, has told commission members that a new SEC would be appointed before the elections.

In the meantime, the commission's administration is still operational. It continues to receive and process the financial documentation of BSE listed companies. Its various bodies implement the regulations issued by the SEC during its mandate.

In fact, even Professor Radoslav Tsonchev, the Chair of the SEC, has continued to perform his duties on a voluntary basis.