CFCL Investment regulation - Bulgaria
Regulatory structure
Please refer to CBL Market infrastructure - Bulgaria for the complete information about the regulatory structure.
Holding restrictions – CSD Market
Holding restrictions
Threshold | Requirement |
Bank shares investment | |
Acquisition reaching or crossing 10%, 20%, 33% or 50% threshold of voting shares | Prior approval from the BNB required before purchase. Non- compliance incurs loss of voting powers until receipt of written permission by the BNB. |
Holding falling below 20%, 33% or 50% threshold of voting shares | Prior notification to the BNB required 10 days prior to the change in the threshold. |
Insurance company shares investment | |
Acquisition crossing 10%, 20%, 30%, 50% threshold or more of voting shares | Prior approval from the FSC required before purchase. Non- compliance incurs loss of voting powers until receipt of written permission by the FSC. |
Holding falling below 10%, 20%, 33% or 50% threshold of voting shares | Prior notification to the FSC required. |
Investment intermediary, managing company or market operator shares investment | |
Acquisition reaching 10% or existing holding crossing 20%, 33% or 50% of voting shares | Prior notification to the FSC required. |
Holding falling below 10%, 20%, 33% or 50% threshold of voting shares | Prior notification to the FSC required. |
Disclosure requirements
Introductory information and categories
This section provides general information about the disclosure requirements for fund securities holdings with which Clearstream Fund Centre must, according to the information available at the time of the present publication, comply with each of the domestic markets and fund markets covered by the Disclosure Requirements.
Fund securities that are held remotely are usually not disclosed by CFCL. A disclosure request received by CFCL regarding such a holding will be forwarded to the relevant client without assessing its validity and the CFCL Client shall handle the request on a voluntary basis.
Disclosure requirements are only available for those countries where CFCL has a link to the respective domestic market or direct access to local domiciled funds that are held in Clearstream’s name on the register.
For fund securities holdings where CFCL has no such link or direct access to the register, clients must be aware that local laws might provide for mandatory disclosure. A disclosure request in this regard will be forwarded to clients without assessing its validity. Clients commit not to unreasonably withhold their consent to such a request and agree to indemnify CFCL for damages resulting directly from non-compliance with mandatory local disclosure requirements.
In most cases, the obligation to disclose is based on the domestic equivalent of a Companies Act, relevant investment funds act or anti-money laundering act and covers all security types.
In some instances, the obligation to disclose is based on stock exchange laws or regulations and only applies to listed domestic and foreign securities.
The Disclosure Requirements do not constitute legal advice and the Clients should seek independent professional advice in relation to fund securities deposited with CFCL, especially as, for those jurisdictions in which no disclosure obligation falls on CFCL, there may be separate disclosure requirements that apply directly to clients of CFCL, shareholders and beneficial owners.
Please note that CFCL is not always given comprehensive information or advised of changes affecting local disclosure requirements.
It remains the sole responsibility of the Client to ensure compliance with local disclosure requirements. If a requirement is not met, it is the Client who will be liable to any related penalty. Clients are therefore advised to seek independent legal advice on the existence and interpretation of local disclosure requirements.
In the case of a discrepancy between the general information contained in this document and the information provided by CFCL for a specific market, as applicable (irrespective of whether this information has been obtained from an agent of Clearstream Fund Centre, or, as the case may be, a foreign regulator of a branch of CFCL), the information provided by CFCL for the specific market as applicable, shall prevail.
N.B.: In all countries, if it is suspected that a disclosure obligation has been breached (for example, that a threshold of holdings under custody has been crossed without being reported), the regulators and the authorities may have the power to investigate. Moreover, in all countries, disclosure obligations might be triggered by enforceable judgements of the competent jurisdiction of the country in question.
Disclosure categories
Clearstream Fund Centre classifies disclosure scenarios according to the following market categories:
Category 1
Markets where disclosure by Clearstream Banking as custodian of Clearstream Fund Centre to issuers, investment fund managers and/or to regulators or market authorities is mandatory under applicable law;
Category 2
Markets where disclosure by Clearstream Banking as custodian of Clearstream Fund Centre of account holders to issuers, investment fund managers and/or foreign regulators or market authorities is a legal obligation in respect of securities in specific circumstances;
Category 3
Markets where there is no obligation for Clearstream Banking as custodian of Clearstream Fund Centre to disclose account holders to issuers, investment fund managers and/or regulators, notwithstanding any disclosure requirement falling directly on clients of Clearstream Fund Centre, shareholders and/or beneficial owners or notwithstanding disclosure necessary to obey an enforceable judgement of the country in question.
Disclosure requirements – CSD Market
Disclosure Category: 2
In the case of holdings in Bulgarian shares issued by banks, Clearstream Fund Centre S.A. (“CFCL”) CFCL may fall under an obligation, under Law on Credit Institutions (Promulgated, State Gazette No. 59/21.07.2006, effective on the day of entry into force of the EU Treaty of Accession of the Republic of Bulgaria, last amendment SG No. 83/2019) to disclose the identity and holdings of customers holding applicable positions.
In addition, the Law on Public Offering of Securities (Promulgated, State Gazette No. 114/30.12.1999, effective 31 January 2000, last amendment SG No. 26/22.03.2020, effective 3 September 2020) and the related Ordinance 39 on Disclosure of a Holding in a Public Company issued by the Financial Supervisory Commission obliges the Central Depository AD (CDAD, the Bulgarian CSD) and the owner of the voting rights to make a disclosure.
Consent
In order to comply with the legislation as mentioned below, clients entering into transactions in the Bulgarian domestic market consent and are hereby deemed to consent to disclosure and to the appointment of the requestor (for example, the Bulgarian National Bank) as their attorney-in-fact, under power of attorney to collect from CFCL such information as is required to be disclosed.
Clients who do not want to grant such authority to CFCL should refrain from holding such shares in their account with CFCL.
Disclosure Requirement
Clients should be aware that the Bulgarian National Bank (BNB) may require CFCL on request to disclose to the BNB the identity of CFCL clients holding shares of Bulgarian banks in CFCL. Furthermore, should the above reporting reveal that a client's holding in the shares of a Bulgarian bank exceeds a certain percentage, the BNB may require the client to disclose information about the final beneficial owners of that holding.
The obligation to disclose falls on CFCL in whose name the securities are registered at the CDAD and is to be cascaded down to the final beneficial owners.
Background and legal basis
Under the Law on Credit Institutions, with respect to holdings in a bank licensed in Bulgaria, the CDAD is obliged to notify the BNB of the name and registered address of the investor acquiring more than 3% of the shares or voting rights in a bank. The disclosure must be made within seven calendar days of the registration of the respective percentage in the book of shareholders by the CDAD.
If requested by the BNB, the investor is obliged to provide the BNB with:
- Additional information on the persons who have acquired (directly or indirectly) 3% or more of the voting shares in the bank;
- A document of registration;
- Particulars of persons holding shares or interests in the capital or property thereof or exercising control over them;
- Information about its business activity during the last preceding five years;
- A declaration that the shares have been paid with own funds, the origin of the funds and the tax paid during the last preceding five years; and
- Any other particulars and/or documents as may be required by the BNB.
Obligation to report threshold crossings
Under the Law on Public Offering of Securities, with respect to holdings in Bulgarian public companies listed on the BSE, any holding that has reached, exceeded or fallen below 5% or a multiple of 5% of the total number of voting rights must be reported to the issuer, to BSE and to the Financial Supervision Commission within four business days after the number of voting shares has reached, exceeded or fallen below the above figures.
It remains the duty of beneficial owners of shares to disclose their notifiable interests. The disclosure is to be made by filling in and signing the disclosure form that can be found on the Financial Supervision Commission's website http://www.fsc.bg/.
The form must be sent to the FSC via mail or via the FSC's electronic system for information disclosure (http://e-register.fsc.bg//) and to the issuer via mail.
Sanctions
Under the Law on Credit Institutions any person, who commits or makes another to commit a violation of the Law on Credit Institutions or of any statutory act issued for its application (related with the obligations above), shall be punished according to Article 152 of the Law on Credit Institutions.
- For a physical person the penalty ranges between BGN 1,000 and BGN 4,000 and, for repeated violation, between BGN 3,000 to BGN 12,000.
- For a legal entity, the penalty ranges between BGN 5,000 and BGN 20,000 and, for repeated violation, between BGN 20,000 and BGN 50,000.
- For a bank or financial holding, the penalty ranges between BGN 50,000 and BGN 200,000 and, for repeated violation, between BGN 200,000 and BGN 500,000.
Furthermore, non-compliance by the investor with the request from the BNB may result in temporary suspension of the voting right of the shareholder and/or order in writing for the shareholder to transfer the shares thereby held within 30 days.
Under the Law on Public Offering of Securities and the related Ordinance 39 of the FSC, any person who has committed a violation of the Ordinance 39 of FSC, as well as any person who has admitted such violations, shall be punished according to Article 221 (1) of the Law on Public Offering of Securities.
- For a physical person, the penalty ranges between BGN 5,000 and BGN 10,000.
- For a legal entity, the penalty ranges between BGN 5,000 and BGN 10,000 and, for repeated violation, between BGN 10,000 and BGN 20,000.
Reporting to the Bulgarian National Bank and other authorities
CFCL, as a direct participant in the Bulgarian National Bank’s settlement system (ESROT), is obliged to disclose on a monthly basis, to its local agent and the Bulgarian National Bank, all its global holdings per security and holder type of its underlying clients in the different ESROT-eligible securities. The identity of the holders within CFCL and the underlying beneficial owners will remain undisclosed.
CFCL may have to provide tax information and documentation to the NRA (National Revenue Agency) in the context of NRA’s Audit on Bulgarian National Bank participants.
Please refer to the CBL Disclosure Requirements – Bulgaria for more information.