The objective of financial statements is to provide information to a range of users for the purpose of economic decision making. To be useful, such statements must present fairly the financial position, performance and cash flows of the reporting entity. Where information which is required by the relevant financial reporting framework is omitted or misstated and such information could influence the economic decision making of a user, financial statements cannot be said to achieve a fair presentation. The concept of ‘materiality’ is used to describe such information.

A recurring theme of discussions at the European Enforcers Coordination Sessions (a forum in which all European National Enforcers of financial information meet to exchange views and discuss experiences of enforcement of IFRS) is the apparent differing views regarding the practical application of the concept of materiality amongst preparers, auditors, possibly users of the financial reports and, in some instances, accounting enforcers. The purpose of this consultation paper is to seek comments from interested parties on their understanding of various aspects of materiality in an effort to contribute to a consistent application of this important concept in financial reporting.

The Consultation is available here: http://www.esma.europa.eu/popup2.php?id=8053

All contributions should be submitted online at www.esma.europa.eu under the heading ‘Consultations’ by 29 February 2012.

Who should read this paper

All interested parties are invited to comment on this consultation paper. It will be primarily of interest to those charged with the governance of issuers who prepare their financial statements under IFRS, the users of the financial reports prepared by same, the auditors of such entities, and other parties who have a particular interest in the concept of materiality and the application of same in an IFRS context.

Next steps

ESMA will consider the feedback it received to this consultation paper in Q2 2012. Based on the outcome of the consultation paper, ESMA will go further and publish a final report later in 2012.

http://www.fsc.bg/public/upload/files/menu/Public-Statement-Public-debt-in-IFRS-Fin-Statements.pdf

Today, the Bulgarian Financial Supervision Commission (FSC) in consortium with the Bulgarian National Bank (BNB) and De Nederlandsche Bank (DNB) on the one side, and the financial regulators of Montenegro – the Central Bank of Montenegro (CBM), the Securities and Exchange Commission (SEC), the Insurance Supervision Agency (ISA) and the Ministry of Finance of Montenegro, on the other, successfully completed the 24 months’ twinning project MN 08 IB FI 01 “Strengthening the regulatory and supervisory capacity of the financial regulators”. The project was launched on 30 November 2009, financed by the European Union (EU) through the “Instrument for Pre-Accession Assistance” with a budget of €1,199,966.94.
The project has contributed to the harmonization of the Montenegrin legislation with the EU acquis communautaire in the area of banking, securities, pensions, insurance and anti-money laundering and terrorist financing (AML/CFT), as well as to strengthening the financial stability, the cooperation between the beneficiary country (BC) institutions and enhancing their administrative capacity. The project results are an important step towards the preparation of the country for the negotiation process to EU accession.
The main results achieved are as follows:
– 8 new laws were prepared, 3 of which were adopted by the Parliament: the Law on Financial Stability Council, the Law on Take-over Bids and the Law on Investment Funds.
– An Action Plan for Basel II implementation, a new Capital Adequacy Decision, a framework for the implementation of Pillar 2 requirements of Basel II Accord and the respective guidelines, manuals and reporting forms were prepared. This will allow the CBM to plan its work over the next few years and help it set priorities. 
– A Financial Stability Council was established and action plans for crisis management situations prepared. 
– Gap analysis on the compliance of Montenegrin legislation with EU requirements was prepared as well as guidance papers for the transposition of all major directives in the area of securities and pension. Nine operational manuals and methodological instructions are ready and most of them are already implemented. Twenty four different trainings, including 2 international conferences, were carried out.
– In the area of insurance supervision Guidelines on how to perform self-assessment of the core principles of the International Association of Insurance Supervision (IAIS) were prepared, as well as a Self-assessment report of the IAIS core principles. Work plans for off-site and on-site inspections were adopted. The preparation for transposition of the Solvency II directive in Montenegro is on a positive track and a Road map is being implemented. Also, a National Bureau of Insurers was established.  As a result of the extensive training and joint work the insurance supervision was strengthened.
– AML/CFT inspection manuals, inspection programs, a MoU on cooperation between the BC institutions for the prevention of money laundering and terrorist financing were elaborated.
– Increased public awareness – an Investor protection and awareness strategy was drafted and is under implementation; information brochures on AML/CFT for the public and for the financial institutions, as well as on the capital market and the voluntary pension funds were issued and distributed; a SEC Information centre was established, a communication seminar for journalists and a seminar for law enforcement authorities on AML/CFT were carried out.

Additional information could be found in Section “Projects”, where the Brochure for the closing event of the twinning project is published:
http://www.fsc.bg/public/upload/files/menu/DipljanCrnaGoraBG_ENFINAL_0.pdf

The European Insurance and Occupational Pensions Authority (EIOPA) published its “Draft Report on Good Practices for Disclosure and Selling of Variable Annuities”  today and launched a public consultation.

This report summarises the findings of EIOPA’s Committee on Consumer Protection and Financial Innovation with the goal to establish good disclosure and selling practices for variable annuities.

Today, EIOPA invites market participants and consumers to participate in a consultation on consumer-related issues. EIOPA welcomes comments from all interested parties on the “Draft Report on Good Practices for Disclosure and Selling of Variable Annuities”.  Currently, EIOPA is seeking input on two sets of questions relating to disclosures and selling practices. These questions and the Draft Report can be accessed via our web site.

EIOPA’s chairman Gabriel Bernardino commented: “This is EIOPA’s first consultation in the area of consumer protection and of great significance to us. First of all, it links  our work in consumer protection with financial innovation. Secondly, even though the analysis that underlies the report has a product specific focus, the result of this consultation will certainly shape our view on how to deal with disclosures and selling arrangements for insurance contracts with an investment element.”

This consultation will start on Thursday 27 October, 2011 and end on 3 January 2012 at 18.00 HRS CET. Comments should be submitted via email to CP-007@eiopa.europa.eu. Please note that comments submitted after the deadline or not submitted on the provided template in Word cannot be processed.

Click here to read the “Draft Report on Good Practices for Disclosure and Selling of Variable Annuities”.

Click here to download the template to submit comments.

European financial markets have been very volatile over recent weeks.  The developments have raised concerns for securities markets regulators across the European Union.  ESMA has been actively monitoring the markets over the last few weeks and has been exchanging information with national competent authorities on the functioning of the markets and the market infrastructure. 

Given these recent market developments, ESMA wants to emphasise the requirements in the Market Abuse Directive (MAD) referring to the prohibition of the dissemination of information which gives, or is likely to give, false or misleading signals as to financial instruments, including the dissemination of rumours and false or misleading news^[1].  European competent authorities will take a firm stance against any behaviour that breaches these requirements and ESMA will support national authorities to act swiftly against any such behaviour which is clearly punishable.  While short-selling can be a valid trading strategy, when used in combination with spreading false market rumours this is clearly abusive.

In the area of short-selling regulation, many authorities already have either requirements for the disclosure of net short positions and/or bans of certain types of short sales in place^[2].  Recent developments have meant that all competent authorities have reinforced the monitoring of their markets and are keeping their regulatory requirements under review.  ESMA has coordinated discussions between the national competent authorities, specifically on the content and timing of any possible additional measures necessary to maintain orderly markets.  

Today some authorities have decided to impose or extend existing short-selling bans in their respective countries. They have done so either to restrict the benefits that can be achieved from spreading false rumours or to achieve a regulatory level playing field, given the close inter-linkage between some EU markets. These measures have been aligned as far as possible in the absence of a common EU legal framework in the area of short-selling and given the very different national legal bases on which such measures can be taken.

The following countries have today announced or will shortly announce new bans on short-selling or on short positions: Belgium, France, Italy and Spain^[3]. Information on these measures can be retrieved from the websites of the relevant competent authorities. The measures will take effect as of 12 August 2011.

[1]Articles 5 and1(2)(c) of MAD.

[2] List of measures adopted by competent authorities on short-selling: http://www.esma.europa.eu/popup2.php?id=7696.

[3]Greece already introduced a ban on short-selling on 8 August 2011.

At its meeting on 27 April 2011, FSC took the following decisions:

1. Approved a prospectus for initial public offering of an issue of shares, which will be issued as result of increase in the capital of Bulstrad Vienna Insurance Group Plc, city of Sofia. The issue is to the amount of 613 647 common shares with right to vote, with right to dividend and liquidation quota, proportionate to the par value of the share, with a par value to the amount of BGN 10 each and issue value of BGN 49. Entered in the public register the above stated issue / in process of issuing/.

2. Entered an issue of shares with the purpose of trading on a regulated securities market, issued as a result of increase in the capital of Investor BG AD, city of Sofia, from BGN  1 199 460 to BGN 1 438 695. The issue is at the amount of BGN 239 235, divided into 239 235 common, freely negotiable shares with right to vote, with a par value of BGN 1 each. 

3. Entered an issue of shares with the purpose of trading on a regulated securities market, issued as a result of increase in the capital of Industrial Holding Bulgaria AD, city of Sofia, from BGN 58 282 079 to BGN 67 978 543. The issue is at the amount of BGN 9 696 464, divided into 9 696 464 common shares with right to vote, with a par value of BGN 1 each. 

4. G P A Group JSC, city of Sofia, notified FSC of its intention to carry out activity as insurance broker on the territory of Romania under freedom to provide services within the EU. FSC will inform the relevant competent authority of the host Member State about the intention of the insurance broker.

At its meeting on 20 April  2011, FSC took the following decisions:

1. Approved a prospectus for initial public offering of an issue of corporate bonds, which will be issued by Sofia Hotel Balkan AD, city of Sofia. The issue is at the amount of Euro 10 000 000, divided into 100 000 common bonds with a par value of Euro 100 each, 10% annual interest, with interest payments every 12 months, the principal being paid in one lump sum on the maturity date, and the term of the bond loan is 10 years, considered from the date of the bond loan conclusion.  Entered in the public register the above issue / in process of issuing/.

2. Approved a prospectus for initial public offering of an issue of shares, which will be issued as a result of increase in the capital of Sofia Hotel Balkan AD, city of Sofia.  The issue is to the amount of 4 785 360 common shares entitling to one vote, right to dividend and liquidation quota, proportionate to the par value of the share, with a par value BGN 1 each and issue value of BGN 3.60 each. Entered in the public register the above issue / in process of issuing/.

3. Entered an issue of shares with the purpose of trading on a regulated market, issued as a result of increase in the capital of Asenova Krepost AD, town of Asenovgrad, from BGN  1 232 568 to BGN 3 632 568. The issue is to the amount of BGN 2 400 000, divided into 800 000 common shares with right to vote, with a par value of BGN 3 each.

4. Entered in the register Debitum Invest SPV, city of Sofia, as a public company.

The minimum rate of return on a year-on-year basis for the preceding 24-month period from 31.03.2009 to 31.03.2011 was   
4,79 percent from the management of the assets of the universal pension funds (UPF). Regarding the occupational pension funds (OPF), a minimum rate of return on an annual basis of 4,90 percent was determined for the same period. The weighted average rate of return of UPFs for the same period, calculated on an annual basis, was 7,98 per cent, and for OPF, respectively, it was 8,16 percent. All compulsory supplementary pension insurance funds reached a rate of return whose amount exceeded the set minimum level of rate of return for the relevant type of fund.

Social Insurance Supervision Division of FSC announced the final results of the activity in supplementary pension insurance for 2010. The information was obtained on the basis of the audited financial statements and statistics, submitted by the pension insurance companies at the Financial Supervision Commission.

As of 31 December 2010, the number of the insured persons in the four types of pension funds – universal, occupational, voluntary and voluntary under professional schemes, reached 3 882 883 persons, which represented an increase with 117 925 persons or by  3,13 percent compared to the insured in the end of 2009.

At 30 December 2010, the accumulated net assets in the system of supplementary pension insurance equaled to BGN 3 987 419 thousand and registered a growth of BGN 831 249 thousand, or 26,34 per cent in comparison with the net assets as of 31.12.2009.

The pension insurance companies closed the reporting 2010 year with total income to the amount of BGN 86 667 thousand, which represented an increase by 9,55 percent, compared to the recorded income in 2009. In 2010, the pension insurance sector realized a positive total net financial result to the amount of BGN 19 722 thousand, which represented a surge of this indicator by 18,83 in comparison with 2009.