The Financial Supervision Commission (FSC) has announced draft amendments to the Act for the activities of collective investment schemes and other undertakings for collective investments. The amendments provide significant changes to the UCITS regulations, including:
- Transposition of the requirements of Directive 2011/61/EU of 8 June 2011 (AIFMD), among which:
- Determining the requirements for alternative investment fund managers
- Stating certain requirements for alternative investment funds (AIFs) – capital, organizational, asset revaluation, public offering, etc.
- Protecting AIFs’ assets – if the depository has been declared insolvent, AIF assets kept by it are not to be included in the depository’s general property; if AIFs’ financial instruments have been lost, the depository shall immediately recover the loss
- Regulation of depository’s liability
AIFs (except for national investment funds) are to be offered to institutional investors only.
- Introducing protection for the assets of collective investment schemes (CIS), analogous to the protection for AIFs’ assets
- Introducing new types of national investment funds (NIFs). Currently, NIFs include only closed-end investment companies (a total of 2 companies). The amendments shall introduce open-end investment companies, as well as closed-end and open-end contractual funds. NIFs shall be classified as AIFs and be publicly offered (only in Bulgaria if open-end), including to retail investors. Potentially, NIFs shall increase assets-under-management volumes and increase stock-exchange liquidity, thus contributing to Bulgarian capital market development
- Introducing the umbrella-subfunds fund structure, each subfund having different investment strategy and segregated assets and performance. This is expected to bring more and wider investment options for investors, allowing higher flexibility and lower costs for both investors and management companies
- Introducing exchange-traded funds (ETFs). This shall allow the structuring of funds with relatively stable assets and increase stock-exchange liquidity.
- Allowing investment intermediaries to serve as depositories for CIS and AIFs. Currently, only banks licensed to provide depository services may serve as depository banks for CIS. The proposed change has been inspired by the presumably increasing number of UCITS, including the forthcoming introduction of new investment forms, and is expected to allow wider depository options and greater competition.
Impact on investors: The proposed amendments to Bulgarian UCITS legislation are expected to introduce significant changes to the funds infrastructure, among which the transposition of AIFMD, introduction of ETFs, umbrella-subfunds structure and new types of national investment funds.