ABOUT 20 ORDINANCES ON THE NON-BANKING FINANCIAL MARKET SHOULD BE APPROVED WITHIN SIX MONTHS
The non-banking sector will be a big trial for the lawmakers in Parliament and for the Financial Supervision Commission (FSC) prior to Bulgaria's future EU-accession. By mid-2006 alone the FSC should approve about 20 ordinances connected with the capital market, securities, pension and healthcare insurance, and the National Assembly must pass by the year-end amendments to the Public Offering of Securities Act. A project called Strengthening of the Administrative Capacity of the FSC To Implement the EU Legislation was also launched on December 1, 2005. It is worth EUR1.3MN and is expected to be finalized in September 2007. Poland and Spain are Bulgaria's partners. According to the project's consultant Slavomir Solazh, the capital market will be the most problematic in implementing European legislation in the non-banking sector. According to the expert, serious attention should be paid to the protection of consumers', shareholders' and buyers' of capital instruments rights.
The ordinance on the requirements to the operation of investment companies for instance already describes in detail the order for assuming the fund of a managing company by another one in case the first one goes bankrupt. The document also describes in detail the rules for evaluating the assets of the investment company. A special order has been set for the evaluation of all kinds of securities and financial instruments. The ordinance on the requirements to the operation of managing companies projects stricter requirements to the natural persons who accept orders for the purchase or sale of stocks of the investment company on behalf of the managing company. A tighter procedure has been stipulated as well for accepting and keeping these orders and their filing by the managing company to the Central Depository.
By the date of our EU-accession the Public Offering of Securities Act should include the regulations of eight EU directives. According to Mr. Solazh, the companies which want to become public will have to give more information in their prospectuses in order to increase their transparency. Bulgaria should also pass a new law on market manipulations, intended to find mechanisms for reducing misuse of internal information.
By mid-2006 the insurance market should be regulated by nine new ordinances, connected with the new Insurance Code. They will settle the issue of mandatory insurances and the Guarantee Fund for them. The ordinances will also include the mechanism for the way in which the insurance companies, the Interior Ministry, and the Transport Ministry will be exchanging and using information from the files of the unified system of the Civil Liability insurance policy. The insurers' technical reserves will be also regulated by a new ordinance. Several more ordinances regulating the activities of pension funds should be passed as well because of necessary amendments to the Insurance Code connected with the EU legislation. Some of the draft ordinances have been already filed for coordination to the companies from the non-banking sector and many of them are still in the stage of preparation. The experts from Poland and Spain who participate in the project's implementation should help with that.
The fact that the FSC is moving to another building might hamper the realization of the project for strengthening its administrative capacity and that might result in not absorbing the funds under it, Mr. Solazh warned. He added that other projects could be imperilled, too, e.g. such under the EU's PHARE programme or with the US Agency for International Development (USAID). The experts who will be consulting the people employed in the FSC need premises, and the twinning projects under the PHARE programme depend not only on the administration, but also on the space of buildings, because the foreign experts should have their own rooms in the administrative building. Mr. Solazh said that more than 200 people are employed in the Polish supervision, and the insurance and pension supervision have twice more personnel than the Bulgarian FSC, whose staff is about 220. With the increase of services to be offered in Bulgaria, our supervision should raise the number of its experts. Just for a comparison, about 1,000 people are employed in Germany's supervising institution.
The unified European passport which the companies registered in the community should have will be the biggest challenge to Bulgarian companies from the non-banking financial market after the country becomes a member of the EU. Thus, an insurance company or an investment intermediary, registered in Italy, will be able to open their offices in Bulgaria without having to register as a separate juristic entity, liable to FSC's control. According to Mr. Solazh, however, no dramatic changes will take place on the Bulgarian market after borders fall.