Changes in the Public Offering of Securities Act

UniCredit Bulbank AD
Changes in the Public Offering of Securities Act have been promulgated in the State Gazette
Fri, 11/08/2017


Updated text of the Public Offering of Securities Act (POSA) has been promulgated in the State Gazette, introducing changes in line with the Strategy for Development of the Bulgarian Capital Market adopted in 2016.

The main amendments include the following:

1. Changes related to the public offering of securities:
- Shortened timeframes for provision of approvals and performance of actions by the Financial Supervision Commission (FSC) on a number of administrative proceedings. These are related to public listing of securities that will make access of companies to the regulated market easier.
- Simplified requirements for public companies regarding publication of regulated information. These requirements aim to minimize the related costs for issuers and avoid duplication of information while ensuring sufficient investor awareness.

2. Changes related to the Investor Compensation Fund:
- Inclusion of the compensation option to be paid to the investment intermediary's clients by the Investor Compensation Fund. This is a decision of the FSC taken within a short timeframe and subject to the presence of certain conditions.
- A representative of the Association of Management Companies can be nominated to become a member of the Fund's Management Board. This will allow all market participants obliged to contribute to the Investor Compensation Fund (investment intermediaries, investment intermediaries - banks and management companies) to be represented in the Fund’s management.

3. Changes related to issuance, trading and restructuring of bonds:
- Better regulation of the rights and obligations of bond issuers, providing for better investor protection, and including the obligation of the issuer to redeem the bonds at issuance price if they are not listed within the timeframe stipulated in the prospectus.  
- Better regulation of the responsibilities of trustee banks of the bondholders and of the terms under which changes to bond issues can be made. Included will be the introduction of certain quorum requirements for taking decisions at general meeting of the bondholders in relation to the enforcement of the issuer's assets to settle debtor claims.
- The list of persons eligible to become a trustee of the bondholders is extended to include licensed investment intermediaries and EU banks.

4. Changes related to convening a general meeting of shareholders (GSM):
- Public companies are obliged to provide GSM invitations to the regulated market.
- Public companies can provide for the option of electronic voting in their GSM invitations, even if such provisions are not included in their by-laws.
- Public companies are allowed to pay semi-annual dividends, if that option is stipulated in their by-laws.

5. The concept of a “secret client” is introduced:
- The "secret client" is a specific instrument for collecting evidence on the provision of investment services by non-licensed persons. It also provides for the commitment of administrative criminal liability of those persons on the basis of evidence collected by the "secret client".

The changes enter into force as of 4 August 2017, with the exception of the provisions related to the semi-annual dividend distribution, which will become effective as of 1 January 2018.


Impact on investors:  Improved legal framework in the field of capital markets to provide for more transparency and higher investor protection.