The Bulgarian National Assembly has approved amendments to the Act on the activities of collective investment schemes and other undertakings for collective investment. The amendments provide for significant changes to the UCITS regulations, as elaborated below.
- Transposition of the requirements of Directive 2011/61/EU on Alternative Investment Fund Managers (AIFMD), among which:
- determining the requirements to alternative investment fund managers (AIFMs) - capital, organisation, licensing and registration regime
- defining alternative investment funds (AIFs) and elaborating on certain requirements to their activities - capital, organisation, investment policy, asset revaluation, public offering
- protection of AIFs' assets - asset segregation; AIF assets kept by a depository will not be included in the depository's bankruptcy estate if the depository would be declared insolvent; if AIFs' financial instruments would be lost, the depository shall immediately recover the loss
- regulation of the depository's obligations and liability, including safekeeping, control of the AIFs' activities, delegation to third parties
AIFs (except for national investment funds) are to be offered to institutional investors only.
- Amendments to the protection regime of the assets of collective investment schemes (CIS), which is to be analogous to the protection of AIFs' assets.
- Introduction of new types of other undertakings for collective investment - national investment funds (NIFs). Currently, NIFs include only closed-end investment companies (a total of two such exist on the market). The amendments will introduce open-end investment companies as well as closed-end and open-end contractual funds. NIFs will be classified as AIFs and will be publicly offered (only in Bulgaria, if open-end), including to retail investors. NIFs could potentially increase assets under management volumes and stock exchange liquidity, thus contributing to the development of the Bulgarian capital market.
- Introduction of umbrella subfund structures, where each subfund has a different investment strategy and segregated assets and performance. This is expected to bring more and wider investment options for investors as well as allow higher flexibility and lower costs for both investors and management companies.
- Introduction of exchange traded funds (ETFs). ETFs' shares/units will be traded continuously and at least one market maker is to be appointed to ensure stock exchange prices for ETFs' shares/units are aligned with their actual or indicative NAV. The introduction of ETFs will allow the structuring of funds with relatively stable assets and will increase stock exchange liquidity.
- Allowing non-bank investment firms meeting certain requirements to serve as depositories for CISs and AIFs. Currently, only banks licensed to provide depository services may serve as depository banks for CISs. The change has been inspired by the presumably increasing number of UCITS, including the forthcoming introduction of new investment forms, and is expected to allow for wider depository options and greater competition.
The amendments have become effective as of 20 December 2013.
Impact on investors: The amendments to the Bulgarian UCITS legislation have introduced significant changes to the funds institutional framework, bringing it closer to EU standards and practices.