According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA), Bulgaria had implemented the majority of the International Organization of Securities Commissions (IOSCO) Objectives and Principles for Securities Regulation. In 2003, the securities regulatory agency changed from the Bulgarian National Securities Commission (BNSC) to the Financial Supervision Commission (FSC). The FSC was established with the purpose of consolidating the supervision of the non-banking sector in Bulgaria by merging the BNSC, the State Insurance Supervision Agency, and the Insurance Supervision Agency. In the 2004 European Bank for Reconstruction and Development (EBRD) Securities Markets Legislation Assessment, which benchmarked the securities markets framework against the IOSCO Objectives and Principles of Securities Regulations, Bulgaria achieved "medium compliance" its main weaknesses being with regard to Investment Services Providers and Self-Regulation. However, since Bulgaria joined the European Union (EU) in 2007, most laws and decrees have been amended to implement the EU harmonization program. Nevertheless, according to the EBRD these changes have not led to an obvious upgrading of Bulgaria's rating. This reflects the fact that in 2004 the country was already close to high compliance.

General Overview

According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA), Bulgaria has implemented the majority of the International Organization of Securities Commissions (IOSCO) Objectives and Principles for Securities Regulation. (IMF 2002, p. 44)

In the 2004 European Bank for Reconstruction and Development (EBRD) Securities Markets Legislation Assessment, Bulgaria achieved "medium compliance" its main weaknesses being with regard to Investment Services Provider and Self-Regulation. The 2004 EBRD Securities Markets Legislation Assessment which benchmarked the securities markets framework against the IOSCO Objectives and Principles of Securities Regulations was updated in 2005. Since Bulgaria joined the European Union (EU) in 2007, most laws and decrees have been amended. Changes in securities legislation are mainly related to implementing the EU harmonization program in the context of the EU accession process. Nevertheless, these changes have not led to obvious upgrading of Bulgaria's rating; this reflecting the fact that in 2004 the country was already close to high compliance. Based on the amendments the definition of Investment Services Provider has been clarified. As a result of the implementation of EU legislation, cooperation between auditors and regulator (as described in article 55 of Directive 2004/39/EC) has been strengthened and auditors of Collective Investment Schemes are now required to report any irregularities or non-compliance, and the full report must be submitted to the regulator. (EBRD 2005b, pp. 6, 7)

Although the detailed provisions of the Law on the Public Offering of Securities (LPOS 1999), 1999 and the ordinances made under the law were carefully drafted to implement international best practice and specific rules covering collective investment schemes, market intermediaries and secondary markets, the legal framework still showed deficiencies. It did not, as of 2002, for instance, clearly define the duties of directors and managers to the company and require them to act in the interests of the shareholders and not in their own interests. Furthermore, the law did not provide adequate protection for minority shareholders. (IMF 2002, p. 43)

However, since the release of the 2002 IMF report, comprehensive amendments to the 1999 Law on Public Offering of Securities (LPOS 1999) (99 in number), which were promulgated in June 2002, establish significant rights for minority shareholders of publicly-owned companies in Bulgaria. According to the U.S. Department of Commerce, they create an important foundation for the adoption of international best practices corporate governance principles in public companies. As a result, Bulgaria now has one of the best securities laws in Europe. (U.S. DoC 2007, p. 48)

Overall, the IMF reports that Bulgaria's regulatory environment for the securities markets generally conforms to the preconditions of IOSCO's Principles. These include the absence of unnecessary barriers to entry and exit to and from markets, and to the development of new products, opening to the widest range of market participants that meet the criteria, the consideration of impacts of regulatory requirements before introduction, and a level playing field. (IMF 2002, p. 42)

According to the 2005 EBRD assessment, the primary laws governing the Bulgarian capital market are the Financial Supervision Commission Act (FSCA 2003), which came into force in March 2003 and was last amended in May 2005, the Law on Public Offering of Securities (LPOS 1999), which became effective in January 2000 and was lasted amended in May 2005, and the Commercial Code (CC 1991), which entered into force in 1991 and has been amended more than 20 times, most recently in May 2005. The LPOS 1999 sets forth rules on mergers and acquisitions, mandatory and voluntary bids, as well as disclosure requirements, while the CC 1991 provides for the basic regulation concerning commercial companies. (EBRD 2005b, pp. 5, 6)

The market regulator is the Financial Supervision Commission (FSC) established in 2003, pursuant to the FSCA 2003. The main purpose of the FSC is to consolidate state supervision over the non-banking sectors in Bulgaria by replacing the Bulgarian National Securities Commission, the Insurance Supervision Agency and the State Insurance Supervision Agency with three corresponding departments in the FSC - Investment Activities Supervision, Insurance Supervision and Social Insurance Supervision. Legislation on the regulator is deemed in line with international standards. (EBRD 2005b, p. 6)

In its 2006 Monitoring Report on the State of Preparedness for EU Membership of Bulgaria and Romania, the European Commission (EC) states that in the field of investment services and securities markets, the amendment to the LPOS 1999 and the Law on Insider Dealing and Manipulation of the Securities Market were approved by the Council in July 2006 and submitted to the Parliament for adoption. In the area of the information society, the Law on Electronic Commerce was adopted. Bulgaria has made good progress in the areas of banking, investment services and securities markets, as well as the information society. (EC 2006, p. 24)

The infrastructure of the stock exchange has been substantially improved, including the establishment of an official index (SOFIX). New trading instruments (government bonds, corporate bonds, Bulgarian Depositary Receipts, and privatization through the stock exchange, municipal and mortgage-backed bonds, and Bulgarian Depository Receipts) have been introduced. As a result of appreciation of nearly all of the most actively traded issues on the Bulgarian Stock Exchange, its capitalization more than doubled reaching 8.4 billion BGN (about USD 5.5 billion) in 2005. In the first six months of 2006 BSE's market capitalization increased further reaching 9.9 billion BGN (about USD 6.7 billion). While the stock exchange has become more attractive to investors - fed by prospects of EU membership - it is still facing low liquidity. To boost its liquidity, the GOB has announced plans to sell BSE to a world-renown capital and stock market.(U.S. DoC 2007, p. 48)

The Bulgarian Stock Exchange (BSE) trading system is fully electronic and automatic. It is designed to provide transparent, up to date and reliable information about trading and the companies listed on the Exchange. It is designed to deal with turnover several times larger than at present. Clearing and settlement of all listed securities must take place through the Central Depository (CD), which provides an efficient safe and cost effective system. (IMF 2002, p. 44)

The IOSCO multilateral memorandum of understanding (MMoU) is based on the thirty IOSCO Objectives and Principles of Securities Regulation (IOSCO Principles) adopted in 1998 and the experience gathered by securities regulators in using bilateral MoUs. The IOSCO MMoU provides a standardized framework for sharing enforcement-related information and a gradually expanding network of participating regulatory agencies. IOSCO members who wish to sign the IOSCO MMoU participate in a comprehensive screening process to establish that they have the legal capacity to fully comply with the terms of the IOSCO MMoU. The FSC is a signatory to the MMoU and an ordinary member of IOSCO. IOSCO members who complete the screening process but are found to lack the legal authority to fully comply with the terms of the IOSCO MMOU will be invited to become signatories to Annex B of the IOSCO MMOU, provided that they express their commitment to obtaining the necessary legal authority to become full signatories. (IOSCO website; OSC website)

The Principles

1. The responsibilities of the regulator should be clear and objectively stated.

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According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA), Bulgaria has implemented the majority of the International Organization of Securities Commissions (IOSCO) Objectives and Principles for Securities Regulation. In the 2004 European Bank for Reconstruction and Development (EBRD) Securities Markets Legislation Assessment, which benchmarked the securities markets framework against the IOSCO Objectives and Principles of Securities Regulations, Bulgaria achieved "medium compliance." However, since Bulgaria joined the European Union (EU) in 2007, most laws and decrees have been amended to implement the EU harmonization program in the context of the EU accession process. Nevertheless, according to the EBRD these changes have not led to obvious upgrading of Bulgaria's rating this reflecting the fact that in 2004 the country was already close to high compliance. (IMF 2002, p. 44; EBRD 2005b, pp. 6, 7) However, there is no publicly available information that explicitly addresses Bulgaria's compliance with this principle.

Starting from 2003, the securities regulatory agency changed from the Bulgarian National Securities Commission (BNSC) to the Financial Supervision Commission (FSC). The FSC was established under the Financial Supervision Act with the purpose of consolidating the supervision of the non-banking sector in Bulgaria by merging the Bulgarian National Securities Commission, the State Insurance Supervision Agency and the Insurance Supervision Agency. (FSC website)

According to the International Monetary Fund (IMF) 2002 assessment, prior to 2003, the BNSC was responsible for securities regulation. The powers of the BNSC were set out in the Law on Public Offering of Securities (LPOS 1999). The LPOS 1999 also set the objectives of the BNSC, which were to provide protection of investors and create perquisites for development of a transparent and efficient capital market. (IMF 2002, p. 44)

The BNSC was created under the Law on Securities, Stock Exchanges, and Investment Companies (SSEICA) of 1995 (repealed and replaced by the Law on Public Offering Of Securities, 1999). This Act, together with the 1997 Regulation on the Structure and Activities of the Securities and Stock Exchanges Commission, defined the framework of the agency. According to this framework, the BNSC had the following responsibilities: (1) issues and revokes the licenses of stock exchanges and over-the-counter securities markets (currently the Bulgarian Stock Exchange-Sofia Ltd. (BSE) and the OTC market) and of investment companies and intermediaries; (2) supervises securities market activities with a view to ensuring strict compliance with statutory requirements; (3) approves prospectuses for public offerings of securities; (4) approves tender offers for the purchase or exchange of shares accounting for more than 25 percent of voting power; (5) registers public companies; (6) keeps public registries of stock exchanges, investment intermediaries, investment companies, public companies, and other issuers of securities; and (7) determines requirements for securities brokers, formulates procedures for their licensing, and keeps a registry of licensed brokers. (IMF 2000; LPOS 1999)

2. The regulator should be operationally independent and accountable in the exercise of its functions and powers.

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According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA), Bulgaria has implemented the majority of the International Organization of Securities Commissions (IOSCO) Objectives and Principles for Securities Regulation. In the 2004 European Bank for Reconstruction and Development (EBRD) Securities Markets Legislation Assessment, which benchmarked the securities markets framework against the IOSCO Objectives and Principles of Securities Regulations, Bulgaria achieved "medium compliance." However, since Bulgaria joined the European Union (EU) in 2007, most laws and decrees have been amended to implement the EU harmonization program in the context of the EU accession process. Nevertheless, according to the EBRD these changes have not led to obvious upgrading of Bulgaria's rating this reflecting the fact that in 2004 the country was already close to high compliance. (IMF 2002, p. 44; EBRD 2005b, pp. 6, 7) However, there is no publicly available information that explicitly addresses Bulgaria's compliance with this principle.

Starting from 2003, the securities regulatory agency changed from the Bulgarian National Securities Commission (BNSC) to the Financial Supervision Commission (FSC). The FSC was established under the Financial Supervision Act with the purpose of consolidating the supervision of the non-banking sector in Bulgaria by merging the Bulgarian National Securities Commission, the State Insurance Supervision Agency and the Insurance Supervision Agency. (FSC website)

As reported by the International Monetary Fund (IMF) in 2002, the Law on Public Offering of Securities (LPOS 1999) specifically provided that the Bulgarian National Securities Commission (BNSC) was an independent State body. However, the BNSC did not have budgetary independence, although it had adequate powers and sufficient qualified staff to carry out its mandate. The LPOS 1999 gave specific powers to the BNSC to obtain information in relation to the operation of the bodies involved in market activities as well as the right to require documents and written explanations from all persons. (IMF 2002, p. 45)

3. The regulator should have adequate powers, proper resources and the capacity to perform its functions and exercise its powers.

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According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA), Bulgaria has implemented the majority of the International Organization of Securities Commissions (IOSCO) Objectives and Principles for Securities Regulation. In the 2004 European Bank for Reconstruction and Development (EBRD) Securities Markets Legislation Assessment, which benchmarked the securities markets framework against the IOSCO Objectives and Principles of Securities Regulations, Bulgaria achieved "medium compliance." However, since Bulgaria joined the European Union (EU) in 2007, most laws and decrees have been amended to implement the EU harmonization program in the context of the EU accession process. Nevertheless, according to the EBRD these changes have not led to obvious upgrading of Bulgaria's rating this reflecting the fact that in 2004 the country was already close to high compliance. (IMF 2002, p. 44; EBRD 2005b, pp. 6, 7) However, there is no publicly available information that explicitly addresses Bulgaria's compliance with this principle.

Starting from 2003, the securities regulatory agency changed from the Bulgarian National Securities Commission (BNSC) to the Financial Supervision Commission (FSC). The FSC was established under the Financial Supervision Act with the purpose of consolidating the supervision of the non-banking sector in Bulgaria by merging the Bulgarian National Securities Commission, the State Insurance Supervision Agency and the Insurance Supervision Agency. However, there is no assessment publicly available as to FSC's compliance with the IOSCO's Objectives and Principles for Securities Regulation. (FSC website)

According to the International Monetary Fund (IMF), the powers of the BNSC were clearly set out in the Law on Public Offering of Securities (LPOS 1999). The LPOS 1999 gave specific powers to the BNSC to obtain information in relation to the operation of bodies involved in market activities as well as the right to require documents and written explanations from all persons. The BNSC had wide powers of surveillance, investigation and enforcement and it used these powers to impose fines and other sanctions. In the year 2000, 10 inspections of investment companies were carried out. A number of violations were found and formal corrective action undertaken in two cases. In one case a license was withdrawn. (IMF 2002, pp. 43, 44)

4. The regulator should adopt clear and consistent regulatory processes.

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According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA), Bulgaria has implemented the majority of the International Organization of Securities Commissions (IOSCO) Objectives and Principles for Securities Regulation. In the 2004 European Bank for Reconstruction and Development (EBRD) Securities Markets Legislation Assessment, which benchmarked the securities markets framework against the IOSCO Objectives and Principles of Securities Regulations, Bulgaria achieved "medium compliance." However, since Bulgaria joined the European Union (EU) in 2007, most laws and decrees have been amended to implement the EU harmonization programme in the context of the EU accession process. Nevertheless, according to the EBRD these changes have not led to obvious upgrading of Bulgaria's rating this reflecting the fact that in 2004 the country was already close to high compliance. (IMF 2002, p. 44; EBRD 2005b, pp. 6, 7) However, there is no publicly available information that explicitly addresses Bulgaria's compliance with this principle.

Starting from 2003, the securities regulatory agency changed from the Bulgarian National Securities Commission (BNSC) to the Financial Supervision Commission (FSC). The FSC was established under the Financial Supervision Act with the purpose of consolidating the supervision of the non-banking sector in Bulgaria by merging the Bulgarian National Securities Commission, the State Insurance Supervision Agency and the Insurance Supervision Agency. However, there is no assessment publicly available as to FSC's compliance with the IOSCO's Objectives and Principles for Securities Regulation. (FSC website)

As per a 2000 report by the International Monetary Fund (IMF), in order to promote transparency, the BNSC's policy rules and regulations were in the public domain. The regulatory framework and its operating procedures and regulations were publicly disclosed in legislation, official documents, public appearances before the legislature, and through the media, the web site, and the Bulgarian Stock Exchange (BSE) Rule-Book. (IMF 2000)

Information on the BNSC's progress toward achieving its objectives and any significant changes in its policies were disseminated widely. The BNSC issued periodic reports of its activities, and also used the Official Bulletin, the media, and the web site to disclose information on its achievements. The periodic reports are published within seven days after their filing with the BNSC, as stipulated in the Law on Securities, Stock Exchanges. In addition, significant changes in financial policies were publicly disclosed and explained immediately after the decision through official publications (such as the State Gazette, the Official Bulletin, and the BNSC's Annual Report), the media, and the website. (IMF 2000)

5. The staff of the regulator should observe the highest professional standards, including appropriate standards of confidentiality.

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According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA), Bulgaria has implemented the majority of the International Organization of Securities Commissions (IOSCO) Objectives and Principles for Securities Regulation. In the 2004 European Bank for Reconstruction and Development (EBRD) Securities Markets Legislation Assessment, which benchmarked the securities markets framework against the IOSCO Objectives and Principles of Securities Regulations, Bulgaria achieved "medium compliance." However, since Bulgaria joined the European Union (EU) in 2007, most laws and decrees have been amended to implement the EU harmonization programme in the context of the EU accession process. Nevertheless, according to the EBRD these changes have not led to obvious upgrading of Bulgaria's rating this reflecting the fact that in 2004 the country was already close to high compliance. (IMF 2002, p. 44; EBRD 2005b, pp. 6, 7) However, there is no publicly available information that explicitly addresses Bulgaria's compliance with this principle.

Starting from 2003, the securities regulatory agency changed from the Bulgarian National Securities Commission (BNSC) to the Financial Supervision Commission (FSC). The FSC was established under the Financial Supervision Act with the purpose of consolidating the supervision of the non-banking sector in Bulgaria by merging the Bulgarian National Securities Commission, the State Insurance Supervision Agency and the Insurance Supervision Agency. However, there is no assessment publicly available as to FSC's compliance with the IOSCO's Objectives and Principles for Securities Regulation. (FSC website)

According to the International Monetary Fund, the chairman, members of the BNSC and staff must sign an agreement binding them to confidentiality. Also, the Law on the Access to Public Information provides protection of personal information. The chairman, members of the BNSC and employees must disclose information about securities held by them as well as those of their spouses and under-age family members, and of their contractual relationships with entities controlled by the BNSC. Any person with a personal interest in the outcome of administrative proceedings is prohibited from taking part in the consideration of the matter. (IMF 2002, p. 45)

6. The regulatory regime should make appropriate use of Self-Regulatory Organizations (SROs) that exercise some direct oversight responsibility for their respective areas of competence, to the extent appropriate to the size and complexity of the markets.

II

According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA), Bulgaria has implemented the majority of the International Organization of Securities Commissions (IOSCO) Objectives and Principles for Securities Regulation. In the 2004 European Bank for Reconstruction and Development (EBRD) Securities Markets Legislation Assessment, which benchmarked the securities markets framework against the IOSCO Objectives and Principles of Securities Regulations, Bulgaria achieved "medium compliance." However, since Bulgaria joined the European Union (EU) in 2007, most laws and decrees have been amended to implement the EU harmonization programme in the context of the EU accession process. Nevertheless, according to the EBRD these changes have not led to obvious upgrading of Bulgaria's rating this reflecting the fact that in 2004 the country was already close to high compliance. (IMF 2002, p. 44; EBRD 2005b, pp. 6, 7) However, there is no publicly available information that explicitly addresses Bulgaria's compliance with this principle.

Starting from 2003, the securities regulatory agency changed from the Bulgarian National Securities Commission (BNSC) to the Financial Supervision Commission (FSC). The FSC was established under the Financial Supervision Act with the purpose of consolidating the supervision of the non-banking sector in Bulgaria by merging the Bulgarian National Securities Commission, the State Insurance Supervision Agency and the Insurance Supervision Agency. However, there is no assessment publicly available as to FSC's compliance with the IOSCO's Objectives and Principles for Securities Regulation. (FSC website)

According to the International Monetary Fund (IMF) 2002 report, there was one self-regulating organization under the jurisdiction of the Bulgarian National Securities Commission (BNSC), i.e., the Bulgarian Stock Exchange (BSE). The Law on Public Offering of Securities (LPOS 1999) allowed for the licensing by the BNSC of other trading bodies. The Bulgarian Stock Exchange Rules and Regulations authorize the imposition of sanctions by the Board of the BSE after consultation with the BNSC for breach of the LPOS 1999 or the Rules and Regulations ranging from a warning to suspension or removal of a member from stock market trading. The BSE had wide powers of investigation and discipline under its rules but may have been inhibited by the desire to maintain on the BSE as many listed companies as possible. Nevertheless, in a number of cases action was taken against failure to submit reports of the filing of accounts and similar breaches of regulations. (IMF 2002, pp. 43, 46)

7. SROs should be subject to the oversight of the regulator and should observe standards of fairness and confidentiality when exercising powers and delegated responsibilities.

II

According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA), Bulgaria has implemented the majority of the International Organization of Securities Commissions (IOSCO) Objectives and Principles for Securities Regulation. In the 2004 European Bank for Reconstruction and Development (EBRD) Securities Markets Legislation Assessment, which benchmarked the securities markets framework against the IOSCO Objectives and Principles of Securities Regulations, Bulgaria achieved "medium compliance." However, since Bulgaria joined the European Union (EU) in 2007, most laws and decrees have been amended to implement the EU harmonization programme in the context of the EU accession process. Nevertheless, according to the EBRD these changes have not led to obvious upgrading of Bulgaria's rating this reflecting the fact that in 2004 the country was already close to high compliance. (IMF 2002, p. 44; EBRD 2005b, pp. 6, 7) However, there is no publicly available information that explicitly addresses Bulgaria's compliance with this principle.

Starting from 2003, the securities regulatory agency changed from the Bulgarian National Securities Commission (BNSC) to the Financial Supervision Commission (FSC). The FSC was established under the Financial Supervision Act with the purpose of consolidating the supervision of the non-banking sector in Bulgaria by merging the Bulgarian National Securities Commission, the State Insurance Supervision Agency and the Insurance Supervision Agency. However, there is no assessment publicly available as to FSC's compliance with the IOSCO's Objectives and Principles for Securities Regulation. (FSC website)

According to the International Monetary Fund (IMF), there was one self-regulating organization under the jurisdiction of the Bulgarian National Securities Commission (BNSC), i.e., the Bulgarian Stock Exchange. The Law on Public Offering of Securities (LPOS 1999) allowed for the licensing by the BNSC of other trading bodies if that should be desirable. The Law on Public Offering of Securities (LPOS 1999) standards for licensing a stock exchange include capital and other structural requirements as well as governance and operating systems. The Stock Exchange is licensed by the BNSC and its rules must be approved by the BNSC. Powers to impose sanctions for non-compliance are laid down in the Stock Exchange Rules and Regulations. Sanctions can be imposed by the Board of the Stock Exchange after consultation with the BNSC of the Exchange. The BNSC comprises representatives of the commercial banks, investment intermediaries, stockbrokers and shareholders of the Exchange. (IMF 2002, p. 46)

8. The regulator should have comprehensive inspection, investigation and surveillance powers.

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According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA), Bulgaria has implemented the majority of the International Organization of Securities Commissions (IOSCO) Objectives and Principles for Securities Regulation. In the 2004 European Bank for Reconstruction and Development (EBRD) Securities Markets Legislation Assessment, which benchmarked the securities markets framework against the IOSCO Objectives and Principles of Securities Regulations, Bulgaria achieved "medium compliance." However, since Bulgaria joined the European Union (EU) in 2007, most laws and decrees have been amended to implement the EU harmonization programme in the context of the EU accession process. Nevertheless, according to the EBRD these changes have not led to obvious upgrading of Bulgaria's rating this reflecting the fact that in 2004 the country was already close to high compliance. (IMF 2002, p. 44; EBRD 2005b, pp. 6, 7) However, there is no publicly available information that explicitly addresses Bulgaria's compliance with this principle.

Starting from 2003, the securities regulatory agency changed from the Bulgarian National Securities Commission (BNSC) to the Financial Supervision Commission (FSC). The FSC was established under the Financial Supervision Act with the purpose of consolidating the supervision of the non-banking sector in Bulgaria by merging the Bulgarian National Securities Commission, the State Insurance Supervision Agency and the Insurance Supervision Agency. However, there is no assessment publicly available as to FSC's compliance with the IOSCO's Objectives and Principles for Securities Regulation. (FSC website)

The International Monetary Fund reports that the Bulgarian National Securities Commission (BNSC) had the powers necessary to supervise, investigate and enforce relevant regulations and to obtain data information, documents, statements and records from persons subject to supervision. As of 2002, there were 400 inspections relating to documents submitted by public companies about obligations for disclosure of information, 600 inspections of documents about general meetings requirements as a result of which the BNSC took administrative action against 35 companies as well as reminder or preventive action letters to other companies. The BNSC carries out on-site inspections and is carried out by the BNSC staff which includes economists and lawyers. However, the IMF in its 2002 report indicated that surveillance and enforcement activity of the BNSC were hindered by failures to file required returns or to observe timetables and proper procedures for meetings, increasing capital and like matters. (IMF 2002, pp. 43, 47)

9. The regulator should have comprehensive enforcement powers.

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According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA), Bulgaria has implemented the majority of the International Organization of Securities Commissions (IOSCO) Objectives and Principles for Securities Regulation. In the 2004 European Bank for Reconstruction and Development (EBRD) Securities Markets Legislation Assessment, which benchmarked the securities markets framework against the IOSCO Objectives and Principles of Securities Regulations, Bulgaria achieved "medium compliance." However, since Bulgaria joined the European Union (EU) in 2007, most laws and decrees have been amended to implement the EU harmonization programme in the context of the EU accession process. Nevertheless, according to the EBRD these changes have not led to obvious upgrading of Bulgaria's rating this reflecting the fact that in 2004 the country was already close to high compliance. (IMF 2002, p. 44; EBRD 2005b, pp. 6, 7) However, there is no publicly available information that explicitly addresses Bulgaria's compliance with this principle.

Starting from 2003, the securities regulatory agency changed from the Bulgarian National Securities Commission (BNSC) to the Financial Supervision Commission (FSC). The FSC was established under the Financial Supervision Act with the purpose of consolidating the supervision of the non-banking sector in Bulgaria by merging the Bulgarian National Securities Commission, the State Insurance Supervision Agency and the Insurance Supervision Agency. However, there is no assessment publicly available as to FSC's compliance with the IOSCO's Objectives and Principles for Securities Regulation. (FSC website)

According to the 2002 Report on the Observance of Standards and Codes (ROSC), the BNSC had the powers necessary to supervise, investigate and enforce relevant regulations and to obtain data information, documents, statements and records from persons subject to supervision. The BNSC had the ability to impose a variety of sanctions including corrective measures, suspension of business, removal of persons from management, fines, confiscation in favor of the state of incomes acquired from activities unlawfully carried out and revocation of licenses in appropriate cases. The Bulgarian Stock Exchange (BSE) can require a temporary halt to trading. However, the International Monetary Fund (IMF) in its 2002 report indicated that surveillance and enforcement activity of the BNSC was hindered by failures to file required returns or to observe timetables and proper procedures for meetings, increasing capital and like matters. (IMF 2002, pp. 43, 46, 47)

10. The regulatory system should ensure an effective and credible use of inspection, investigation, surveillance and enforcement powers and implementation of an effective compliance program.

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According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA), Bulgaria has implemented the majority of the International Organization of Securities Commissions (IOSCO) Objectives and Principles for Securities Regulation. In the 2004 European Bank for Reconstruction and Development (EBRD) Securities Markets Legislation Assessment, which benchmarked the securities markets framework against the IOSCO Objectives and Principles of Securities Regulations, Bulgaria achieved "medium compliance." However, since Bulgaria joined the European Union (EU) in 2007, most laws and decrees have been amended to implement the EU harmonization programme in the context of the EU accession process. Nevertheless, according to the EBRD these changes have not led to obvious upgrading of Bulgaria's rating this reflecting the fact that in 2004 the country was already close to high compliance. (IMF 2002, p. 44; EBRD 2005b, pp. 6, 7) However, there is no publicly available information that explicitly addresses Bulgaria's compliance with this principle.

Starting from 2003, the securities regulatory agency changed from the Bulgarian National Securities Commission (BNSC) to the Financial Supervision Commission (FSC). The FSC was established under the Financial Supervision Act with the purpose of consolidating the supervision of the non-banking sector in Bulgaria by merging the Bulgarian National Securities Commission, the State Insurance Supervision Agency and the Insurance Supervision Agency. However, there is no assessment publicly available as to FSC's compliance with the IOSCO's Objectives and Principles for Securities Regulation. (FSC website)

According to the 2002 Report on the Observance of Standards and Codes (ROSC), the Bulgarian National Securities Commission (BNSC) conducted periodic routine inspections and carried out inspections for cause as a result of reports filed with the BNSC. The BNSC carried out on-site inspections (118 on investment intermediaries and 10 on investment companies in the year ended 2000). Inspections were carried out by BNSC staff, which includes economists and lawyers. (IMF 2002, pp. 46-47)

The BNSC had the ability to impose a variety of sanctions including corrective measures, suspension of business, removal of persons from management, fines, confiscation in favor of the state of incomes acquired from activities unlawfully carried out and revocation of licenses in appropriate cases. The Bulgarian Stock Exchange (BSE) can require a temporary halt to trading. However, the International Monetary Fund (IMF) in its 2002 report indicated that surveillance and enforcement activity of the BNSC was hindered by failures to file required returns or to observe timetables and proper procedures for meetings, increasing capital and like matters. (IMF 2002, pp. 43, 47)

11. The regulator should have authority to share both public and non-public information with domestic and foreign counterparts.

II

According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA), Bulgaria has implemented the majority of the International Organization of Securities Commissions (IOSCO) Objectives and Principles for Securities Regulation. In the 2004 European Bank for Reconstruction and Development (EBRD) Securities Markets Legislation Assessment, which benchmarked the securities markets framework against the IOSCO Objectives and Principles of Securities Regulations, Bulgaria achieved "medium compliance." However, since Bulgaria joined the European Union (EU) in 2007, most laws and decrees have been amended to implement the EU harmonization programme in the context of the EU accession process. Nevertheless, according to the EBRD these changes have not led to obvious upgrading of Bulgaria's rating this reflecting the fact that in 2004 the country was already close to high compliance. (IMF 2002, p. 44; EBRD 2005b, pp. 6, 7) However, there is no publicly available information that explicitly addresses Bulgaria's compliance with this principle.

Starting from 2003, the securities regulatory agency changed from the Bulgarian National Securities Commission (BNSC) to the Financial Supervision Commission (FSC). The FSC was established under the Financial Supervision Act with the purpose of consolidating the supervision of the non-banking sector in Bulgaria by merging the Bulgarian National Securities Commission, the State Insurance Supervision Agency and the Insurance Supervision Agency. However, there is no assessment publicly available as to FSC's compliance with the IOSCO's Objectives and Principles for Securities Regulation. (FSC website)

Based on the Law on Public Offering of Securities (LPOS 1999), the BNSC had authority to obtain and share with other domestic regulators information on matters of issuing and revoking licenses, investigation and enforcement, determinations, surveillance, market conditions and client identification. In 2002, an agreement was concluded between the financial sector regulators, including the Bulgarian National Bank (BNB), on cooperation, coordination and information sharing. The BNSC had authority to share information with regulators from other jurisdictions. (IMF 2002, p. 47)

The IOSCO multilateral memorandum of understanding (MMoU) is based on the thirty IOSCO Objectives and Principles of Securities Regulation (IOSCO Principles) adopted in 1998 and the experience gathered by securities regulators in using bilateral MoUs. The IOSCO MMoU provides a standardized framework for sharing enforcement-related information and a gradually expanding network of participating regulatory agencies. IOSCO members who wish to sign the IOSCO MMoU participate in a comprehensive screening process to establish that they have the legal capacity to fully comply with the terms of the IOSCO MMoU. The FSC is a signatory to the MMoU and an ordinary member of IOSCO. IOSCO members who complete the screening process but are found to lack the legal authority to fully comply with the terms of the IOSCO MMOU will be invited to become signatories to Annex B of the IOSCO MMOU, provided that they express their commitment to obtaining the necessary legal authority to become full signatories. (IOSCO website; OSC website)

12. Regulators should establish information sharing mechanisms that set out when and how they will share both public and non-public information with their domestic and foreign counterparts.

II

According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA), Bulgaria has implemented the majority of the International Organization of Securities Commissions (IOSCO) Objectives and Principles for Securities Regulation. In the 2004 European Bank for Reconstruction and Development (EBRD) Securities Markets Legislation Assessment, which benchmarked the securities markets framework against the IOSCO Objectives and Principles of Securities Regulations, Bulgaria achieved "medium compliance." However, since Bulgaria joined the European Union (EU) in 2007, most laws and decrees have been amended to implement the EU harmonization programme in the context of the EU accession process. Nevertheless, according to the EBRD these changes have not led to obvious upgrading of Bulgaria's rating this reflecting the fact that in 2004 the country was already close to high compliance. (IMF 2002, p. 44; EBRD 2005b, pp. 6, 7) However, there is no publicly available information that explicitly addresses Bulgaria's compliance with this principle.

Starting from 2003, the securities regulatory agency changed from the Bulgarian National Securities Commission (BNSC) to the Financial Supervision Commission (FSC). The FSC was established under the Financial Supervision Act with the purpose of consolidating the supervision of the non-banking sector in Bulgaria by merging the Bulgarian National Securities Commission, the State Insurance Supervision Agency and the Insurance Supervision Agency. However, there is no assessment publicly available as to FSC's compliance with the IOSCO's Objectives and Principles for Securities Regulation. (FSC website)

In 2002, an agreement was concluded between the financial sector regulators, including the Bulgarian National Bank (BNB), on cooperation, coordination and information sharing. The International Monetary Fund (IMF), in its 2002 report recommends a Memoranda of Understanding (MoU) be signed between the BNSC and those foreign regulators, where there is regular exchange of information, to clearly define the scope of the cooperation and the procedures to be adopted in the use of any such information. (IMF 2002, p. 47)

The IOSCO multilateral memorandum of understanding (MMoU) is based on the thirty IOSCO Objectives and Principles of Securities Regulation (IOSCO Principles) adopted in 1998 and the experience gathered by securities regulators in using bilateral MoUs. The IOSCO MMoU provides a standardized framework for sharing enforcement-related information and a gradually expanding network of participating regulatory agencies. IOSCO members who wish to sign the IOSCO MMoU participate in a comprehensive screening process to establish that they have the legal capacity to fully comply with the terms of the IOSCO MMoU. The FSC is a signatory to the MMoU and an ordinary member of IOSCO. IOSCO members who complete the screening process but are found to lack the legal authority to fully comply with the terms of the IOSCO MMOU will be invited to become signatories to Annex B of the IOSCO MMOU, provided that they express their commitment to obtaining the necessary legal authority to become full signatories. (IOSCO website; OSC website)

13. The regulatory system should allow for assistance to be provided to foreign regulators who need to make inquiries in the discharge of their functions and exercise of their powers.

II

According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA), Bulgaria has implemented the majority of the International Organization of Securities Commissions (IOSCO) Objectives and Principles for Securities Regulation. In the 2004 European Bank for Reconstruction and Development (EBRD) Securities Markets Legislation Assessment, which benchmarked the securities markets framework against the IOSCO Objectives and Principles of Securities Regulations, Bulgaria achieved "medium compliance." However, since Bulgaria joined the European Union (EU) in 2007, most laws and decrees have been amended to implement the EU harmonization programme in the context of the EU accession process. Nevertheless, according to the EBRD these changes have not led to obvious upgrading of Bulgaria's rating this reflecting the fact that in 2004 the country was already close to high compliance. (IMF 2002, p. 44; EBRD 2005b, pp. 6, 7) However, there is no publicly available information that explicitly addresses Bulgaria's compliance with this principle.

Starting from 2003, the securities regulatory agency changed from the Bulgarian National Securities Commission (BNSC) to the Financial Supervision Commission (FSC). The FSC was established under the Financial Supervision Act with the purpose of consolidating the supervision of the non-banking sector in Bulgaria by merging the Bulgarian National Securities Commission, the State Insurance Supervision Agency and the Insurance Supervision Agency. However, there is no assessment publicly available as to FSC's compliance with the IOSCO's Objectives and Principles for Securities Regulation. (FSC website)

The International Monetary Fund (IMF) reported that there were no restrictions on the ability of the BNSC to provide information to foreign regulators. (IMF 2002, p. 47)

The IOSCO multilateral memorandum of understanding (MMoU) is based on the thirty IOSCO Objectives and Principles of Securities Regulation (IOSCO Principles) adopted in 1998 and the experience gathered by securities regulators in using bilateral MoUs. The IOSCO MMoU provides a standardized framework for sharing enforcement-related information and a gradually expanding network of participating regulatory agencies. IOSCO members who wish to sign the IOSCO MMoU participate in a comprehensive screening process to establish that they have the legal capacity to fully comply with the terms of the IOSCO MMoU. The FSC is a signatory to the MMoU and an ordinary member of IOSCO. IOSCO members who complete the screening process but are found to lack the legal authority to fully comply with the terms of the IOSCO MMOU will be invited to become signatories to Annex B of the IOSCO MMOU, provided that they express their commitment to obtaining the necessary legal authority to become full signatories. (IOSCO website; OSC website)

14. There should be full, timely and accurate disclosure of financial results and other information that is material to investors’ decisions.

CP

According to the International Monetary Fund (IMF), the objective of the rules on the conduct of issuers is to ensure investor protection and to promote the development of a transparent and efficient securities market. Mandatory disclosure requirements are set out in the Law on Public Offering of Securities (LPOS 1999) and associated regulations. The LPOS 1999 and the Ordinance on the Prospectus for Public Offering of Securities and Disclosure by Public Companies and Other Issuers of Securities require full, accurate and timely disclosure of financial results and other material information. However, companies listed on the Bulgarian Stock Exchange (BSE) are not required to immediately report matters that may have a material effect on the value of the shares. (IMF 2002, pp. 47-48)

Although the offering information required for prospectuses complies with IOSCO Principles, public offerings by the State are exempt from these disclosure requirements. The State offering documents do not include full financial statements or prospective statements as are required by the prospectus requirements. (IMF 2002, p. 48)

15. Holders of securities in a company should be treated in a fair and equitable manner.

EN

According to the International Monetary Fund (IMF) 2002 report, the law on securities regulations lack effective provisions for the protection of minority shareholders and a general obligation of directors to exercise their powers with care, and to act in the interests of shareholders as well as of the company. However, since the release of the IMF's 2002 report comprehensive amendments to the Law on Public Offering of Securities (99 in number), which were promulgated in June 2002, establish significant rights for minority shareholders of publicly owned companies in Bulgaria. As a result, Bulgaria now has one of the best securities laws in the Europe. (IMF 2002, p. 43; U.S. DoC 2007, p. 48)

In the World Bank assessment of Bulgaria's Corporate Governance Principles in 2002, the country: 'largely observes' the requirements for equal treatment of shareholders within same class; 'largely observes' the prohibition of insider-trading and self-dealing; and 'does not observe' the requirements for disclosure by directors and managers of material interests in transactions or matters affecting the company. (WB 2002, Annex B pp. 1-2)

According to the 2004 European Bank for Reconstruction and Development (EBRD) Corporate Governance Sector Assessment, Bulgaria is a country whose corporate governance related laws (i.e., "law on the books") when compared to the Organization for Economic Cooperation and Development (OECD) Principles of Corporate Governance were rated as "medium compliance", meaning that the legal framework is generally in line with international standards, but with a number of shortcomings. Major weaknesses were found in the rights and equitable treatment of shareholders. The Bulgarian law does not impose restrictions on transactions involving shareholders in conflict of interest situations, and there are no checks to guarantee that the price paid for the transaction is fair. With reference to the effectiveness of corporate governance legislation, in 2005, the EBRD completed a Legal Indicator Survey to test how corporate governance legislation works in practice. Bulgaria was found to have a relatively effective system with reference to the possibility of a minority shareholder to obtain disclosure, but with some shortcomings in the possibility of obtaining redress, due to the limited actions available to obtain a successful outcome. (EBRD 2005b, pp. 10, 11)

In their 2006 assessment of the effectiveness of the corporate governance legislation in Bulgaria, Cigna and Enriques state that regarding legal actions of minority shareholders, procedures are not particularly smooth, and this can lead to enforcement difficulties. The time required to reach an executable judgment can be up to two years and the defendant can easily delay the process further. Actions available to minority shareholders in the unlisted company scenario are limited to the derivative suit. (Cigna and Enriques 2006, pp. 46, 51)

According to the 2005 EBRD Transition report, generally, the various remedies available to minority shareholders whose rights have been breached can be divided into actions before the civil or commercial court, arbitration proceedings and criminal prosecution. Of the possible actions before the commercial court, filing a suit to challenge the validity of a transaction (render the transaction void) is one of the most common. However this is not available in Bulgaria, where only actions for damages are allowed. Another remedy is a liability suit against the company's management. This can be initiated by the shareholder (as a direct liability suit) or on behalf of the company (a derivative suit). In the former case, the plaintiff seeks redress for individual damages while the latter action targets damages suffered by the company. However, a direct liability suit may not be brought in Bulgaria. Bulgaria also has no comprehensive definition of related-party transactions in its legislation. (Cigna and Enriques 2005, p. 25)

The 2005 EBRD report concludes that overall, Bulgaria - besides Bosnia and Herzegovina - appears to have the most limited legal frameworks for protecting minority shareholder rights. (Cigna and Enriques 2005, p. 27)

16. Accounting and auditing standards should be of a high and internationally acceptable quality.

ID

On May 17, 2006, Directive 2006/43/EC of the European Parliament and the Council came into force requiring all statutory audits to be carried out on the basis of International Standards on Auditing (ISAs) as adopted by the European Commission (EC). European Union (EU) member states shall adopt and publish the provisions necessary to comply with this Directive before June 29, 2008. Member states may impose additional requirements relating to the statuary audits of annual and consolidated accounts for periods expiring on June 29, 2010. Under the Bulgarian Independent Financial Audit Law of 2002, audits should be carried out in accordance with ISAs from July 1, 2003 (in practice, for the audits of 2003 financial statements). Auditors are also obliged to comply with the Professional Code of the Institute of Certified Public Accountants of Bulgaria (ICPAB) which is required by law to be based on the International Federation of Accountants (IFAC) Code of Ethics. (World Bank 2002b, p. 7; EC 2006/43, pp. 2, 3, 12, 21)

As a result of the European Commission Regulation (EC) No 1606/2002, starting January 1, 2005 all European Union (EU) listed companies are required to prepare consolidated accounts following the International Financial Reporting Standards (IFRSs) endorsed by the EC. Member States may decide as well to extend this permission or this requirement to other companies as regards the preparation of their consolidated accounts and/or their annual accounts. Bulgaria became an EU Member State on January 1, 2007. Pursuant to the Accountancy Act of 2002 (AA 2002), since 2003, all listed companies in Bulgaria as well as banks, insurance companies, mutual funds, and other financial institutions, have been required to prepare their consolidated financial statements according to IFRSs. Starting in 2005, IFRSs are required in both consolidated and individual company financial statements of listed companies and financial institutions as well as all large Bulgarian limited liability entities. Small and medium size enterprises (SMEs) may choose whether to apply IFRSs or National Accounting Standards (NASs). NASs are based on the EU 4th and 7th Directive as well as on IFRSs. (Deloitte IAS Plus website; ICPAB 2006, pp. 56, 57; Regulation No 1606/2002)

17. The regulatory system should set standards for the eligibility and the regulation of those who wish to market or operate a collective investment scheme.

FC

According to the 2002 International Monetary Fund (IMF) report, rules covering collective investment schemes implement the International Organization of Securities Commissions (IOSCO) Principles for Securities Regulation. A licensed investment company must comply with specific criteria as to its capital, technical equipment and facilities, organization and qualification of its directors and staff. All directors and the management company must meet criteria of professional experience, place of residence, lack of criminal convictions or regulatory suspension. These requirements apply also to the directors of fund management companies. (IMF 2002, pp. 43, 48)

18. The regulatory system should provide for rules governing the legal form and structure of collective investment schemes and the segregation and protection of client assets.

FC

According to the 2002 International Monetary Fund (IMF) report, rules covering collective investment schemes implement the International Organization of Securities Commissions (IOSCO) Principles for Securities Regulation. The Law on Public Offering of Securities (LPOS 1999) and associated regulations i.e., the Ordinance on the Requirements for the Activities of Investment Companies, Ordinance on the Prospectuses and Ordinance on the Licenses, set specific standards for managers of an investment company. Responsibility for compliance rests with the Board of Directors or the Managing Board in the case of a two-tier system of governance, and with the company, which manages the activities of the investment fund and carries out the sale and redemption of shares of an open-ended fund on behalf of the company. (IMF 2002, pp. 3, 48-49)

19. Regulation should require disclosure, as set forth under the principles for issuers, which is necessary to evaluate the suitability of a collective investment scheme for a particular investor and the value of the investor’s interest in the scheme.

FC

According to the 2002 International Monetary Fund (IMF) report, rules covering collective investment schemes implement the International Organization of Securities Commissions (IOSCO) Principles for Securities Regulation. The Law on Public Offering of Securities (LPOS 1999) and Ordinances prescribe requirements for minimum capital investment companies, prohibitions on investment in assets in which managers have an interest, separation of custody of assets, requirements for asset valuation disclosure, control of ownership, liquidity requirements, reports and publicity and other matters. (IMF 2002, pp. 43, 49)

20. Regulation should ensure that there is a proper and disclosed basis for asset valuation and the pricing and the redemption of units in a collective investment scheme.

FC

According to the 2002 International Monetary Fund (IMF) report, rules covering collective investment schemes implement the International Organization of Securities Commissions (IOSCO) Principles for Securities Regulation. The Law on Public Offering of Securities (LPOS 1999) and Ordinances prescribe requirements for minimum capital investment companies, prohibitions on investment in assets in which managers have an interest, separation of custody of assets, requirements for asset valuation disclosure, control of ownership, liquidity requirements, reports and publicity and other matters. (IMF 2002, pp. 43, 49)

Apart from the information provisions specific to investment companies in the LPOS and the Ordinance, there are conduct of business rules in the Ordinance on the Requirements of Investment Intermediaries Activities and in the Stock Exchange Rules, which govern sales by brokers and other investment intermediaries. Fundamental rules about asset valuation, pricing and redemption of shares are set out in the LPOS 1999 and in the Ordinance on the Requirements for the Activities of Investment Companies. The Articles of Association of an investment company must set out the detailed rules and procedures for determination of the net asset value of the shares. Valuation and disclosure for open-ended investment companies must occur at least twice per week at equal intervals. (IMF 2002, p. 49)

21. Regulation should provide for minimum entry standards for market intermediaries.

FC

According to the 2002 International Monetary Fund (IMF) report, rules covering market intermediaries implement the International Organization of Securities Commissions (IOSCO) Principles for Securities Regulation. All market intermediaries are licensed. As of 2002, licenses were granted by the Bulgarian National Securities Commission (BNSC) except in the case of banks, where licenses are issued by the Bulgarian National Bank (BNB). The criteria for licensing covers capital adequacy, qualifications of personnel, proper business plan and publicity of information. These requirements are set out in the Law on Public Offering of Securities (LPOS 1999) and the ordinances and regulations made pursuant to that Law. Individual brokers and investment advisors must satisfy integrity and competence requirements and pass an examination set by the BNSC. (IMF 2002, pp. 43, 49)

22. There should be initial and ongoing capital and other prudential requirements for market intermediaries that reflect the risks that the intermediaries undertake.

FC

According to the 2002 International Monetary Fund (IMF) report, rules covering market intermediaries implement the International Organization of Securities Commissions (IOSCO) Principles for Securities Regulation. The Law on Public Offering of Securities (LPOS 1999) set out capital and other prudential requirements for investment intermediaries, including the establishment and maintenance of a reserve fund. Specific rules are set out in the Ordinance on the Capital Adequacy and Liquidity of the Investment Intermediaries. Initial capital, which must be maintained, is 90,000 BGN for intermediaries executing transactions for client accounts only and 250,000 BGN for those executing transactions for both own and client accounts. The intermediary must also establish a reserve fund, which must be at least 10 percent of the capital. (IMF 2002, pp. 43, 49-50)

Other prudential requirements cover position, currency and other risks. Capital adequacy requirements take into account balance sheet items, off balance sheet transactions and activities of affiliated companies. As of 2002, monitoring was carried out through on site inspections, monthly reports by the intermediary to the BNSC and by a requirement to advise immediately if prudential standards threaten to be breached. (IMF 2002, p. 50)

23. Market intermediaries should be required to comply with standards for internal organization and operational conduct that aim to protect the interests of clients, ensure proper management of risk, and under which management of the intermediary accepts primary responsibility for these matters.

FC

According to the 2002 International Monetary Fund (IMF) report, rules covering market intermediaries implement the International Organization of Securities Commissions (IOSCO) Principles for Securities Regulation. The general standards imposed on investment intermediaries are set out in the Law on Public Offering of Securities (LPOS 1999). In addition market intermediaries must have internal organizational rules to supplement those and to require observance of all the requirements by employees. The Ordinance on the Requirements for Investment Intermediaries Activities imposes specific obligations in relations with clients. (IMF 2002, pp. 43, 49)

24. There should be procedures for dealing with the failure of a market intermediary in order to minimize damage and loss to investors and to contain systemic risk.

FC

According to the 2002 International Monetary Fund (IMF) report, rules covering market intermediaries implement the International Organization of Securities Commissions (IOSCO) Principles for Securities Regulation. As of 2002, the Bulgarian National Securities Commission (BNSC) could require remedial action against breach of capital or liquidity rules. Actions ranged from an agreed financial plan to mandatory instructions by the BNSC. The BNSC had the power to transfer client accounts to another investment company in the case of need, and may suspend the sale or carrying out of transactions in certain securities and may withdraw a license. The Bulgarian Stock Exchange (BSE) has established a guarantee fund against broker default. (IMF 2002, pp. 43, 50)

Starting from 2003, the securities regulatory agency changed from the BNSC to the Financial Supervision Commission (FSC). The FSC was established under the Financial Supervision Act with the purpose of consolidating the supervision of the non-banking sector in Bulgaria by merging the Bulgarian National Securities Commission, the State Insurance Supervision Agency and the Insurance Supervision Agency. However, there is no assessment publicly available as to FSC's compliance with the IOSCO's Objectives and Principles for Securities Regulation. (FSC website)

25. The establishment of trading systems including securities exchanges should be subject to regulatory authorization and oversight.

II

According to the 2002 International Monetary Fund (IMF) report, rules covering market intermediaries and secondary markets implement the International Organization of Securities Commissions (IOSCO) Principles for Securities Regulation. (IMF 2002, p. 43)

Starting from 2003, the securities regulatory agency changed from the Bulgarian National Securities Commission (BNSC) to the Financial Supervision Commission (FSC). The FSC was established under the Financial Supervision Act with the purpose of consolidating the supervision of the non-banking sector in Bulgaria by merging the Bulgarian National Securities Commission, the State Insurance Supervision Agency and the Insurance Supervision Agency. (FSC website) However, there is no assessment publicly available as to FSC's compliance with the IOSCO's Objectives and Principles for Securities Regulation.

26. There should be ongoing regulatory supervision of exchanges and trading systems which should aim to ensure that the integrity of trading is maintained through fair and equitable rules that strike an appropriate balance between the demands of different market participants.

II

According to the 2002 International Monetary Fund (IMF) report, rules covering market intermediaries and secondary markets implement the International Organization of Securities Commissions (IOSCO) Principles for Securities Regulation. There is ongoing supervision of the Exchange and its members through on-site inspections. The Exchange must submit half yearly and annual reports including an accountancy report and other information and documents on request. Stock exchange records must be kept for 50 years. (IMF 2002, pp. , 4550)

27. Regulation should promote transparency of trading.

FC

According to the 2002 International Monetary Fund (IMF) report, rules covering market intermediaries and secondary markets implement the International Organization of Securities Commissions (IOSCO) Principles for Securities Regulation. The trading system is fully electronic and provides transparency and market information. A stock exchange must ensure to its members and their clients equal access to market information and equal conditions for participation in trading. The trading system provides market users with real time information. (IMF 2002, pp. 43, 50)

28. Regulation should be designed to detect and deter manipulation and other unfair trading practices.

FC

According to the 2002 International Monetary Fund (IMF) report, rules covering market intermediaries and secondary markets implement the International Organization of Securities Commissions (IOSCO) Principles for Securities Regulation. The Law on Public Offering of Securities (LPOS 1999) prohibits insider trading and market manipulation. There are broad definitions of insider trading and market manipulation in the LPOS 1999. The Stock Exchange carries out inspections of members and of trades. (IMF 2002, pp. 43, 50)

29. Regulation should aim to ensure the proper management of large exposures, default risk and market disruption.

II

According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA), Bulgaria has implemented the majority of the International Organization of Securities Commissions (IOSCO) Objectives and Principles for Securities Regulation. In the 2004 European Bank for Reconstruction and Development (EBRD) Securities Markets Legislation Assessment, which benchmarked the securities markets framework against the IOSCO Objectives and Principles of Securities Regulations, Bulgaria achieved "medium compliance." However, since Bulgaria joined the European Union (EU) in 2007, most laws and decrees have been amended to implement the EU harmonization programme in the context of the EU accession process. Nevertheless, according to the EBRD these changes have not led to obvious upgrading of Bulgaria's rating this reflecting the fact that in 2004 the country was already close to high compliance. (IMF 2002, p. 44; EBRD 2005b, pp. 6, 7) However, there is no publicly available information that explicitly addresses Bulgaria's compliance with this principle.

30. Systems for clearing and settlement of securities transactions should be subject to regulatory oversight, and designed to ensure that they are fair, effective and efficient and that they reduce systemic risk.

II

According to the 2002 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA), Bulgaria has implemented the majority of the International Organization of Securities Commissions (IOSCO) Objectives and Principles for Securities Regulation. In the 2004 European Bank for Reconstruction and Development (EBRD) Securities Markets Legislation Assessment, which benchmarked the securities markets framework against the IOSCO Objectives and Principles of Securities Regulations, Bulgaria achieved "medium compliance." However, since Bulgaria joined the European Union (EU) in 2007, most laws and decrees have been amended to implement the EU harmonization programme in the context of the EU accession process. Nevertheless, according to the EBRD these changes have not led to obvious upgrading of Bulgaria's rating this reflecting the fact that in 2004 the country was already close to high compliance. (IMF 2002, p. 44; EBRD 2005b, pp. 6, 7) However, there is no publicly available information that explicitly addresses Bulgaria's compliance with this principle.

According to the 2002 International Monetary Fund (IMF) report, rules covering market intermediaries and secondary markets implement the IOSCO Principles for Securities Regulation. All transactions in shares in public companies are dematerialized and must be effected through the Central Depository (CD). The Law on Public Offering of Securities (LPOS 1999) provides for oversight of the CD by the Bulgarian National Securities Commission (BNSC). The Central Depository Board of Directors must include a representative of the Bulgarian National Bank (BNB) and the Ministry of Finance (MoF). (IMF 2002, pp. 43, 50-51)