At its meeting on 6 April 2011, FSC took the following decisions:

1. Entered Bulgarian Credit Rating Agency AD as a credit rating agency in the Register under Art.30, para 1, Item 13 of the FSCA, kept by FSC.

2. Approved a prospectus for public offering of shares of HBG Investment Property Fund REIT, city of Varna.  The issue is to the amount of 32 500 common shares with a par value of BGN 1 each and issue value of BGN 17.20 each. Entered the issue of shares (in process of issuing) in the FSC’s Register.

3. Entered an issue of shares, issued by Holding Asenova Krepost AD, town of Asenovgrad, as a result of increase in the company’s capital. The issue is to the amount of BGN 4 644 201, divided into 4 644 201 common shares with right to vote, with a par value of BGN 1 each.

On 23 March, 2011 the European Insurance and Occupational Pensions Authority (EIOPA) has launched the second Europe-wide stress-test for the insurance sector. The stress test is conducted in cooperation with the respective national supervisory authorities and will be concluded by the end of May, based on 2010 financial results. EIOPA will publish the aggregated results of the test in July 2011. The test is targeted towards the European insurance sector and will include a minimum of 50% of insurance companies per country measured by gross premium income. The Swiss Financial Market Authority (Finma) has decided to join the stress test in addition to member states of the European Union and European Economic Area (EEA).

To carry out this stress-test, EIOPA considered the macroeconomic assumptions that were applied to the banking stress test, in particular the assumptions underlying the macroeconomic adverse scenario provided by the European Central Bank. EIOPA further enhanced the definitions of those stress scenarios to address the actual market environment of the insurance industry.

Stress tests are a regular supervisory tool and the execution of periodic exercises is set down in EIOPA’s regulation, which defines EIOPA’s composition, powers, tasks and decision making process.

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.

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.

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

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

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.

European Securities and Markets Authority (ESMA):

• warns investors against dealing with unauthorised firms offering foreign exchange investments, and
• alerts retail investors to the main risks involved in forex trading.

The full text of the Warning is available here:

http://www.fsc.bg/public/upload/files/menu/FOREX_Investor_Warning_EN.pdf

On Dec 14th, 2011 the Bulgarian Financial Supervision Commission held a major international conference on “Development Outlook of the Non-banking financial sector”. The event was to present the new European policy in the financial sector and to stimulate discussion about the situation of the Bulgarian capital market and its future development.

The event was opened by Mr. Boyko Borisov, Prime Minister of Bulgaria. This gave a clear and strong signal to the business for the efforts that the Bulgarian government is making to overcome the effects of the global crisis in the non-banking financial sector and confirmed the priority of the country for full integration into the European structures. In his speech, the Prime Minister stressed that the European Union is on the verge of making extremely important decisions for its future development many of which are related to financial security and stability of financial markets. In this situation, the role of authorities dealing with supervision of the financial sector is crucial. In times of financial crisis, state institutions are urged to reinforce people’s confidence in the stability of markets in order to ensure their proper functioning and integrity.  The Prime Minister also noted that the Financial Supervision Commission proved that it has the capacity to cope with the challenges of the crisis as a result of the FSC Chairman’s personal efforts and the efforts of the institution.

In his turn, Mr. Stoyan Mavrodiev, Chairman of the FSC said that the financial crisis has impacted heavily on the global financial markets. This requires immediate action to overcome the consequences and to stabilize the financial markets nationwide. As part of the European financial regulators FSC supports the actions of the European Commission and together with the regulatory authorities of other member states is interested in seeking solutions and creating policies for effective oversight of the financial system. FSC is to promote these steps more stable, transparent, predictable and accountable to the public, investors and consumers.

A special guest speaker to the conference was Mr. Steven Maijoor – President of the European Securities and Markets Authority. He gave strong support for the Financial Supervision Commission. On Dec 13th a discussion meeting with representatives of the non-banking financial sector in Bulgaria was held. Mr. Maijoor presented immediate tasks and priorities of ESMA. Moreover, he answered many questions from interested parties regarding how the European supervisor authority interacts with the investment community.

Marcus Repnik, Permanent Representative of the World Bank for Bulgaria, the Czech Republic and Slovakia stated that the government regulators play a key role in shaping the capital markets. “The challenge now is to develop a regional capital market, which exceeds national borders”, said Mr. Repnik. In his view, this will allow better investment opportunities. According to him financial services and products are becoming more sophisticated and complex, and consumers need clear rules, effective supervision and responsibility.

After the capital market session, the conference „Development outlook of the non-banking financial sector“ was divided into two discussion panels. Mr. Angel Dzhalazov – Vice-Chairman of the FSC chaired the pension insurance session on profitability of the pension funds in a financial crisis condition and perspectives for introduction of multifunds in Eastern European countries. Ms. Antonia Gineva – Member of the Board moderated the financial consumer protection and financial education module.

Additional information including videos from the conference is uploaded on the following link:
http://www.worldbank.bg/WBSITE/EXTERNAL/COUNTRIES/ECAEXT/BULGARIAEXTN/0,,contentMDK:23069105~menuPK:305444~pagePK:2865066~piPK:2865079~theSitePK:305439,00.html