Bulgaria: new laws on MiFID

On 1 November, new laws came into force in Bulgaria to implement MiFID, the EU Directive introducing a single market and regulatory regime for investment services across all EU member states.

At the same time, new laws preventing market abuse have also been introduced, along with changes in the existing laws on public offers of securities.

Key changes for investment intermediaries include:

· widening the scope of investment instruments they can deal with to include, among others, UCITS’ units, options, futures, swaps, contracts for difference and commodity derivatives

· allowing them to outsource their services, as long as the third party service provider satisfies specific requirements

· requiring them to keep their clients’ financial instruments separate each other and from their own and not to use them interchangeably, unless specific conditions are satisfied

· prohibiting them from holding client funds, requiring them instead to place them with certain institutions, such as the central bank, credit institutions and collective investment schemes

· requiring them to obtain more information from clients, and strengthen their ‘know your client’ procedures

· permitting them to trade financial instruments on other regulated markets licensed by the Bulgarian Financial Supervision Commission, as well as the Bulgarian Stock Exchange

· requiring them to classify their clients as professional and non-professional, with different requirements for each category

· There are also various changes for publicly-traded investments, the most important of which is the introduction of squeeze-out rights for majority shareholders with a 95% or greater holding, with corresponding sell out rights for minority holders.

· Law: Markets in Financial Instruments Act; Regulation on Investment Intermediary Activities; Abuse with Financial Instruments Act; changes to Public Offering of Securities Act.