MILETI MLADENOV TAKES THE LEAD OF A COMPENSATION FUND
September 24 is the deadline by which investment intermediaries should pay the entrance fee of 1% of the assets of customers in the fund for compensation of investors in securities. According to the transitional and final regulations of the Public Offering of Securities Act, intermediaries should make the payment within a month after a managing board of the fund is elected.The Managing Board was appointed by the Chairman of the Financial Supervision Commission, Apostol Apostolov, on August 24, as his deputy Dimana Rankova failed to do so within the legal term.Mileti Mladenov who has notable experience in that field was elected Chairman of the board. In 1999 he was appointed chairperson of the Bank Deposit Insurance Fund where he remained until 2002. In 2003 he started working in the compulsory Civil Liability and Accident insurance fund.Borislav Popov, the Sofia deputy regional governor so far, was appointed Deputy Chairman of the board. The other members are Vesselin Ralchev, Chairman of the Dealing Financial Company Board of Directors (proposed by the Association of Investment Intermediaries), Irina Martseva, Chief Secretary of the Association of Commercial Banks (proposed by the banks' association), and Yavor Dimitrov, Head of the Payment Systems and Settlement Department in the Bulgarian National Bank (elected by both associations). The board members have a five-year mandate and can be re-elected without limits. In fact, a day before they were elected the regulation of the fund's structure and activities was published. Therefore, there are no practical obstacles for the fund to start operations.The body aims at compensating the customers of an investment intermediary which is in financial difficulties. It takes into account cases in which the intermediary is in insolvency procedure or the Financial Supervision Commission has to suspend its license. The fund also pays additional compensation to the customers of branches of a foreign investment intermediary, when the one provided in the country of its registration does not cover the minimum amount.The amount the fund will be paying is 90% of the customer's receivable. However, it cannot exceed a fixed amount that will be gradually raised. It will be BGN12,000 by the end of 2006, BGN24,000 - by 2007, BGN30,000 - by 2008-2009, and BGN40,000 - after 2010. The fund collects its resources from entrance fees and annual instalments paid by investment intermediaries. The annual instalments are calculated by the managing board. The amount for 2005 is already fixed by the law - 0.5% of the total amount of resources and 0.1% of the value of the other customers' assets (securities) for the last quarter of 2005, calculated on average monthly basis. The intermediaries are obliged to pay the instalment no later than January 31, 2006. In fact, the amount in 2005 is the highest that the managing board may choose in the future. In case of delayed payment, investment intermediaries will pay interests.When the regulation became effective, another term started to pass. By November 23 the Managing Board of the fund has to file its 2005 draft budget to the Financial Supervision Commission. It's worth noting that the board may invest the collected amount in securities either issued or guaranteed by the state, in short-term bank deposits or in deposits in the Bulgarian National Bank. Of course, that can only happen under the watchful eye of the supervision department.