The European Securities and Markets Authority (ESMA) has launched a Common Supervisory Action (CSA) with National Competent Authorities (NCAs) on the valuation of UCITS and open-ended Alternative Investment Funds (AIFs) throughout the European Union.

 The common supervisory action will take place in 2022. The aim is to establish whether the organizational rules and legal framework on the principles and methodologies for valuing financial assets held by UCITS and AIFs are complied with, with a view to carrying out a fair and equitable valuation as in normal and under stressful market conditions, in particular with regard to the valuation of investments in illiquid assets.

 The full ESMA communication can be found at: https://www.esma.europa.eu/press-news/esma-news/esma-launches-common-supervisory-action-ncas-valuation-ucits-and-open-ended

In pursuance of the objectives set before the Financial Supervision Commission, Mr. Boyko Atanasov presented a communication on the successfully completed process of integrating new communication software in the Commission.

“The changes are part of the Commission’s strategy to improve online services and channels for its communication with supervisors, consumers of non-banking financial services and society at large. Our ultimate goal is timely communication and information,” said Boyko Atanasov.

Pursuant to Council of Ministers Decision No. 441 of 04.06.2021 and published list of persons who fall or could fall within the scope of sanctions imposed by the Office of Foreign Assets Control (OFAC) by the United States Department of the Treasury, the Financial Supervision Commission informs that:

 has no relations with persons included in the list under item 1 of Decision of the Council of Ministers No. 441 of 04.06.2021

 in accordance with its legal powers and the current regulatory requirements it observes and is ready to assist the competent authorities under item 1 of Decision of the Council of Ministers No. 441 of 04.06.2021 on the persons included in the scope of inspections.

The FSC emphasizes that in its supervisory practice it will continue to take all legally regulated and necessary measures to preserve the stability of the capital market and the non-banking financial sector as a whole, prevention of illegal practices leading to damage to the confidence of the investment community.

Ordinance No. 71 on the requirements for the governance system of insurers and reinsurers, adopted by the FSC on 22.07.2021, was promulgated in SG 64 / 2021 and is effective. In accordance with the delegations provided for in it for issuing guidelines on its implementation, at its meeting on 09.09.2021 the FSC adopted the following instructions:

 Instructions regarding the application of Art. 75, para. 1 of Ordinance No. 71 in connection with the observance of the Guidelines for Outsourcing to Cloud Service Providers issued by the European Insurance and Occupational Pensions Authority (EIOPA-BoS-20-002);

 Instructions regarding the application of Art. 102, para. 1 of Ordinance No. 71 in connection with the observance of the Guidelines on Information and Communication Technology Security and Governance issued by the European Insurance and Occupational Pensions Authority (EIOPA-BoS-20/600).

 These guidelines were adopted by the FSC in response to the intensifying process of digitalization in insurance. Through them, the FSC aims to facilitate the application of the specific requirements for the award of activities to could service providers (services provided through data processing in the so-called. “Cloud space”), which are a source of new risks for insurers and reinsurers and require a higher standard of information security in their activities. With these guidelines the FSC aims to establish additional guarantees to ensure compliance with the confidentiality, integrity and availability of information and information systems, with a view to limit the operational risk to which insurers and reinsurers are additionally exposed as a result of the use of high technologies for storage, processing and access to data.

 The adoption of these guidelines completes the national legal framework for the governance system of insurers and reinsurers in accordance with the Insurance Code and the guidelines of the European Insurance and Occupational Pensions Authority. In this manner conditions are created for better management of the new risks faced by insurers and reinsurers, and the guarantees for protection of the interests of the users of insurance services in the environment of a digitized insurance market in the Republic of Bulgaria are strengthened.

As a continuation of the consistent policy pursued by the Financial Supervision Commission with regard to innovation through the new Financial Innovation Monitoring Strategy for the period 2021-2024, the FSC has started an active partnership with the Bulgarian Fintech Association (BFA) and representatives of business organizations with expressed interest in stimulating the development of financial innovations in the non-banking sector.

At a special meeting initiated by the Commission, the main lines of action were outlined and concrete steps were set out to support the development of innovative solutions in the non-banking financial sector in Bulgaria:

 Development of financial literacy of consumers of financial services and investors through the participation of experts from the Commission in master’s programs and training innovation camps with students.

 Participation of regulator representatives in local and international webinars of BFA.

 Regular meetings with fintech companies to provide feedback on the assessment of potential risks to both the market and consumers, as well as potential actions and measures to minimize the risks and maximize the benefits of growing interest in innovative financial products and / or technologies, while in compliance with regulatory requirements.

 Promoting and encouraging the use of the already operational Innovation Hub, which provides quick and easy access to information for start-ups and on issues and cases of a regulatory and legal nature.

 Research and preparation for the introduction of a regulatory Sandbox for the non-banking financial sector which will allow FinTech companies to test their products in a real and secure environment, and the supervisor to monitor this process to optimally adapt regulations to digital finance.

 Joint discussion and adaptation of the new regulatory framework for crowdfunding, which is considered as an established form of alternative financing for start-ups and SMEs. This task will be related to the supervision of a digital platform designed to connect or facilitate the connection of potential investors or lenders with companies seeking financing.

In pursuance of the Financial Innovation Monitoring Strategy for the period 2021-2024, the Financial Supervision Commission, at the invitation of the Bulgarian National Bank, took part in an organized online event by the National Bank of Lithuania on “Regulatory sandbox”. The meeting focused on sharing good practices in building innovative financial products. In order to minimize the risks and build well-functioning services in a real business environment, through the much-needed reliable and secure support from the relevant national supervisory authority.

The FSC continues to build on what has been achieved so far in terms of creating an innovation-friendly business environment, with an emphasis on the need for collaboration between regulators and business to create a developed fintech ecosystem.

The event program for 2022 builds on the achievements of the Financial Supervision Commission so far in support of fintech solutions and their entry into everyday life.

The Financial Supervision Commission makes recommendations to the participants in the capital market for increased vigilance and the implementation of an enhanced risk management policy before proceeding with investments in financial instruments issued by issuers related to the Russian Federation. The scope of the warnings also includes issuers and counterparties whose production, supply chains and end markets are strongly linked to the Russian Federation.

The actions taken by the FSC are in the context of the complicated international situation and the imposition of sanctions and restrictions by the EU, USA, Canada, UK and other countries on the Russian Federation, the Russian Central Bank, credit institutions and companies and individuals.

The international tensions that have led to sanctions and restrictions on the Russian Federation are another challenge for international financial markets. However, the Financial Supervision Commission is confident that all companies in the capital market will be able to successfully deal with the situation, respecting the interests of their customers and working to maintain the stability of the capital market in Bulgaria.

Regarding an inquiry by Nova TV in the case “9-year-old girl must repay a loan inherited from her deceased mother”, so far the Financial Supervision Commission has not received a complaint from the heirs of the deceased. In view of the specifics of the case and in order to respond to public concerns, the Chairman of the Financial Supervision Commission initiated investigation at the Commission’s own initiative, ensuring that it would take all necessary measures within its legal powers to conduct a detailed and urgent inspection on the case.

On 23 November 2021 a conference entitled “Bulgaria on the European Fintech Map” was held to present the Annual Report of the Bulgarian Fintech Association for 2021. The event was dedicated to investments in the sector and the place of our country in Europe and the world.

Fintech regulations in the non-banking financial sector were presented by Ms. Neda Muzho – Head of Supervision of Public Companies, Issuers of Securities and SPVs, who took part in the conference.

She noted that the last year, marked by the Covid-19 pandemic, not only changed our understanding of reality, but imposed new rules and gave a strong impetus to the digital transformation in the non-banking financial sector.

Ms. Muzho outlined the key topics in the fintech sector for the period 2021-2025, namely: creating “strategic autonomy”, ensuring a level playing field, strengthening EU oversight, competition and the clash of digital policies.

She also drew attention to the strategic goals set for the new business model:

 Financial literacy;

 Dialogue within the framework of creating an ecosystem of connections within 2020-2030. on “Fintech and establishing conditions for stimulating sustainable business models through smart regulations”;

 Development of cybersecurity.

Ms. Muzho ended her address with the words: “We are here together at this conference with responsibility, because we are building a new pillar that is very important and necessary for sustainable development, and this is perhaps the most important role of the Financial Supervision Commission, offering financial stability in the long run.”