Ordinance No. 44 of 20.10.2011 on Requirements for the Activity of Collective Investment Schemes, Management Companies, National Investment Funds, Alternative Investment Funds and Managers of Alternative Investment Funds

ORDINANCE No. 44 of 20.10.2011 on the requirements for the activity of collective investment schemes, management companies, national investment funds, alternative investment funds and persons managing alternative investment funds (Title amended - State Gazette, No. 63 of 2016; amended, No. 55 of 2022) Published - State Gazette, No. 85 of 01.11.2011, effective from 01.11.2011; amended, No. 52 of 10.07.2015; amended and supplemented, No. 63 of 12.08.2016; amended and supplemented, No. 55 of 15.07.2022; amended and supplemented, No. 36 of 21.04.2023; amended and supplemented, No. 38 of 28.04.2023; amended and supplemented, No. 52 of 18.06.2024; amended and supplemented, No. 90 of 25.10.2024; amended, No. 20 of 11.03.2025, effective from the date of introduction of the euro in the Republic of Bulgaria; amended, No. 65 of 08.08.2025, effective from 08.08.2025. Adopted by Decision No. 129-N of 20 October 2011 of the Commission for Financial Supervision

Chapter One
GENERAL PROVISIONS

Art. 1. (Amended in full - State Gazette, No. 63 of 2016; amended and supplemented, No. 55 of 2022.) This Ordinance regulates:

1. the content of the contracts between the investment company and the management company and between the national investment company and the person managing it;
2. (amended - State Gazette, No. 55 of 2022) the content of the contract with the depositary in connection with the management of national investment funds and alternative investment funds;
3. the liquidity of collective investment schemes and national investment funds and the additional requirements for transferable securities, money market instruments and other assets in which collective investment schemes and national investment funds may invest;
4. the method and procedure for the valuation of assets and liabilities of collective investment schemes and national investment funds, for the calculation of the net asset value, for the calculation of the issue price and the repurchase price of the shares of collective investment schemes and national investment funds;
5. the activity of issuing, selling and repurchasing shares of collective investment schemes and national investment funds;
6. (amended - State Gazette, No. 55 of 2022) the content of the prospectus, the key investor information document, reports and marketing communications;
7. the activity and requirements for structures of the type main - feeder collective investment scheme;
8. the transformation and termination of collective investment schemes, management companies, persons managing alternative investment funds, and national investment funds;
9. (supplemented - State Gazette, No. 55 of 2022) other requirements for the activity of collective investment schemes, management companies, alternative investment funds, persons managing alternative investment funds, and national investment funds, aimed at protecting the interests of investors;
10. the requirements for the organization and activity of management companies, their capital adequacy and liquidity;
11. the requirements for the activity of national investment funds;
12. the requirements for the activity of persons managing alternative investment funds in connection with the funds managed by them;
13. the procedure for considering complaints from the management company and from the person managing an alternative investment fund.

Chapter Two
REQUIREMENTS FOR THE ACTIVITY OF COLLECTIVE INVESTMENT SCHEMES

Section I
Contract of the investment company with the management company

Art. 2. (Amended - State Gazette, No. 63 of 2016.) The contract of the investment company with the management company contains at least:

1. the distribution of rights and obligations between the management body of the investment company and the management company in connection with the management of the activity of the investment company;
2. a description of the means and procedures by which the management company will have access to the essential information necessary for the performance of its obligations;
3. a description of the procedures by which the investment company can review the activity of the management company in connection with statutory and contractual obligations;
4. the rules for the effective prevention and/or resolution of conflicts of interest between them;
5. (amended - State Gazette, No. 63 of 2016) the obligation of the investment company to give consent to the depositary for immediate collection, as well as to send a copy of this consent to the management company;
6. the possibility of authorizing the management company by the investment company to participate in general meetings of issuers, in whose financial instruments the assets of the investment company are invested;
7. the conditions necessary for the replacement of the management company and the procedure by which all essential information is sent to the new management company;
8. the conditions and procedure for the issuance (sale) and repurchase of the shares of the open-type investment company through the management company, as well as for the delegation of these functions by the management company to a third party;
9. the conditions and procedure for the administration of the shares of the investment company, including legal and accounting services in connection with asset management, investor information requests, valuation of assets and liabilities, and calculation of the net asset value, control for compliance with legal requirements and internal rules, dividend distribution, contract execution, and record keeping;
10. the rules for the control by the investment company of the costs incurred by the management company in connection with statutory and contractual obligations;
11. the term of the contract, if any, as well as the conditions and procedure for amendment, termination and termination of the contract, including in cases where the management company has notified the investment company of a decision taken by the management company for transformation, opening of proceedings for declaration of insolvency or for termination of the contract, as well as upon withdrawal of the license of the management company.

Section II
Content of the contract of the management company with the depositary (Title amended - State Gazette, No. 63 of 2016)

Art. 3. (Amended - State Gazette, No. 63 of 2016; amended in full, No. 55 of 2022.) The written contract under Art. 35a, para. 2 of the Law on the Activity of Collective Investment Schemes and Other Undertakings for Collective Investment (LACISOCI) must contain the elements under Art. 2 of Delegated Regulation (EU) 2016/438 of the Commission of 17 December 2015 supplementing Directive 2009/65/EC of the European Parliament and of the Council as regards the obligations of depositaries (OJ, L 78/11 of 24 March 2016).

Art. 4. (Amended - State Gazette, No. 63 of 2016; repealed, No. 55 of 2022).
Art. 5. (Amended - State Gazette, No. 63 of 2016; repealed, No. 55 of 2022).
Art. 6. (Amended - State Gazette, No. 63 of 2016; repealed, No. 55 of 2022).
Art. 7. (Amended and supplemented - State Gazette, No. 63 of 2016; repealed, No. 55 of 2022).

Section III
Liquidity of the collective investment scheme and additional requirements for securities, money market instruments and other assets under Art. 38 LACISOCI

Art. 8. (Supplemented - State Gazette, No. 63 of 2016.) (1) The collective investment scheme is obliged to invest in liquid transferable securities and other liquid financial assets under Art. 38 LACISOCI, as well as to maintain such a structure of assets and liabilities that allows it to fulfill its obligations for the repurchase of shares at any time. (2) The management company is obliged to comply with the requirement under para. 1 for each collective investment scheme it manages, as well as not to expose the collective investment scheme to risks that do not correspond to its risk profile. (3) (New - State Gazette, No. 63 of 2016) The management company of a listed fund notifies the Deputy Chairman of the applicable methods it will use to ensure the liquidity of the fund, as well as of any decision to change them. (4) (New - State Gazette, No. 63 of 2016) In the event that the methods for ensuring liquidity under para. 3 do not allow the obligation for the repurchase of shares to be fulfilled when necessary, the Deputy Chairman requires their correction within 14 days from the submission of the notification. (5) (New - State Gazette, No. 63 of 2016) Paragraph 4 shall not apply if a permit for the use of a loan under the procedure of Art. 54 has been issued.

Art. 9. (Amended - State Gazette, No. 90 of 2024.) (1) (Amended - State Gazette, No. 90 of 2024) The management company adopts rules for the maintenance and management of liquidity for each collective investment scheme it manages. The rules specify the principles and methods of management, as well as the rights and obligations of the persons responsible for the management, accounting and internal control over liquidity. The rules are submitted to the Commission for Financial Supervision, hereinafter referred to as "the Commission", within 7 days from their adoption, respectively from their change. (2) If the rules submitted under para. 1 do not guarantee the maintenance of liquidity, the Deputy Chairman, heading the "Investment Activity Supervision" Directorate, hereinafter referred to as "the Deputy Chairman", gives mandatory instructions for the amendment of the rules.

Art. 10. (Amended - State Gazette, No. 63 of 2016.) (1) (Amended - State Gazette, No. 63 of 2016) The management company is obliged to constantly monitor the liquidity of each collective investment scheme it manages.
(2) (Amended - State Gazette, No. 63 of 2016) Assets on which a pledge has been established or which have other restrictions on their use by the collective investment scheme are not considered liquid.

Art. 11. (Amended and supplemented - State Gazette, No. 55 of 2022.) (1) The transferable securities in which the collective investment scheme may invest must meet the following conditions:
1. the potential losses that the collective investment scheme may suffer from holding them are limited to the amount paid for them;
2. their liquidity must not expose the ability of the collective investment scheme to repurchase its shares upon request of their holders to risk;
3. they have a reliable valuation, which is determined as follows:
a) securities admitted to or traded on a regulated market under Art. 38, para. 1, items 1 - 4 LACISOCI have accurate, reliable and regularly established market prices or prices provided by systems independent of the issuers for valuation; b) securities under Art. 38, para. 2 LACISOCI have periodic valuation carried out based on information arising from the issuer, or based on competent investment research;
4. there is information available for them, which is considered suitable, if:
a) for securities admitted to or traded on a regulated market under Art. 38, para. 1, items 1 - 4 LACISOCI, accurate and detailed information on the security or, where applicable, on the portfolio of the security is regularly provided to the market; b) for securities under Art. 38, para. 2 LACISOCI, accurate information on the security or, where applicable, on the portfolio of the security is regularly provided to the collective investment scheme;
5. they are freely transferable;
6. their acquisition corresponds to the investment objectives and/or investment policy of the collective investment scheme;
7. the risks associated with them are adequately covered by the risk management rules of the collective investment scheme.
(2) Securities under Art. 38, para. 1, items 1 - 3 LACISOCI are considered to meet the requirements under para. 1, items 2 and 5, if the collective investment scheme does not have information that would lead to another conclusion.
(3) For transferable securities under Art. 38 LACISOCI, shares/shares of an investment company, contractual fund or unit trust of the closed type are also considered, if:
1. they meet the conditions under para. 1 and 2;
2. investment companies and unit trusts apply corporate governance rules applicable to companies, and contractual funds are subject to corporate governance rules equivalent to those applicable to companies;
3. the company managing the contractual fund, respectively the company managing the assets of the investment company and the unit trust, if any, is subject to national regulation, with the aim of protecting investors.
(4) For transferable securities under Art. 38 LACISOCI, financial instruments are also considered that meet the conditions under para. 1 and 2 and are guaranteed by or linked to the performance of other assets, which may be different from those under Art. 38, para. 1 LACISOCI. (5) (Amended - State Gazette, No. 55 of 2022) When financial instruments under para. 4 contain an embedded derivative instrument, Art. 40 - 43 LACISOCI apply to the embedded derivative instrument. (6) (New - State Gazette, No. 55 of 2022) When a management company on behalf of a collective investment scheme managed by it carries out a total return swap or invests in other derivative financial instruments with similar characteristics, Art. 45 - 49 LACISOCI apply to these portfolio assets of the collective investment scheme.

Art. 12. (1) Money market instruments within the meaning of § 1, item 6 of the Additional Provisions of LACISOCI are instruments that are:
1. financial instruments admitted to trading or traded on a regulated market within the meaning of Art. 38, para. 1, items 1 - 3 LACISOCI;
2. financial instruments that are not admitted to trading.
(2) Money market instruments in which the collective investment scheme may invest are considered to be routinely traded on the money market if they meet one of the following requirements:
1. they have a maturity at issuance of up to 397 days inclusive;
2. they have a remaining term to maturity of up to 397 days inclusive;
3. they are subject to regular yield adjustments under money market conditions at least every 397 days;
4. their risk profile, including with regard to their credit risk and interest rate risk, corresponds to the risk profile of financial instruments with maturity under items 1 and 2 or with yield adjustments under item 3.

Art. 13. (1) Money market instruments in which the collective investment scheme may invest are liquid money market instruments if they can be sold at limited costs and within an adequately short period of time, taking into account the obligation of the collective investment scheme to repurchase its shares upon request of any of the share holders. (2) Money market instruments in which the collective investment scheme may invest are instruments whose value can be determined accurately at any time, if there are accurate and reliable valuation systems for them that meet the following requirements:

1. allow the collective investment scheme to calculate its net asset value, based on the value at which the instrument included in its portfolio can be exchanged between informed and consenting independent parties under fair contract conditions;
2. are based on market data or valuation models, including systems based on amortized values/costs.
   (3) Money market instruments under Art. 38, para. 1, items 1 - 3 LACISOCI are considered to meet the requirements under para. 1 and 2, if the collective investment scheme does not have information that would lead to another conclusion.

Art. 14. (1) Money market instruments under Art. 38, para. 1, item 9 LACISOCI, which are different from those traded on a regulated market, but whose issuance or issuer is regulated for the purposes of protecting investors and savings, must meet the following conditions:
1. meet at least one of the requirements under Art. 12, para. 1 and all requirements under Art. 13, para. 1 - 3;
2. are freely transferable and suitable information is available for them, including information necessary for carrying out a suitable assessment of the credit risks associated with investments in them, taking into account the requirements under para. 2 - 4.
(2) For money market instruments under Art. 38, para. 1, item 9 LACISOCI, letters "b" and "g", for money market instruments under Art. 38, para. 1, item 9 LACISOCI, letter "a", which are issued by regional or local authorities in the Republic of Bulgaria or another Member State or by a public international organization of which at least one Member State is a member, but which are not guaranteed by a Member State, as well as in the case of a federal state that is a Member State - by one of the members of the federal state, suitable information under para. 1, item 2 is considered to exist if there are:
1. information on the issuance or issuance program, as well as on the legal and financial status of the issuer before the issuance of the money market instrument;
2. an update of the information under item 1, which is carried out at least once a year and upon any significant event;
3. verification of the information under item 1, which is carried out by suitably qualified third parties who are independent of the issuer;
4. reliable statistical data on the issuance or the issuance program.
(3) For money market instruments under Art. 38, para. 1, item 9, letter "v" LACISOCI, it is considered that suitable information under para. 1, item 2 is available if there are:
1. information on the issuance or issuance program, or on the legal and financial status of the issuer before the issuance of the money market instrument;
2. an update of the information under item 1, which is carried out at least once a year and upon any significant event;
3. reliable statistical data on the issuance or the issuance program or other data allowing the carrying out of a suitable assessment of the credit risks associated with investments in such instruments.
(4) For money market instruments under Art. 38, para. 1, item 9, letter "a" LACISOCI, other than those listed in para. 2 and issued by the European Central Bank, the Bulgarian National Bank or the central bank of another Member State, suitable information under para. 1, item 2 is considered to be information on the issuance or issuance program or on the legal and financial status of the issuer before the issuance of the instrument.

Art. 15. (Supplemented - State Gazette, No. 55 of 2022) The person under Art. 38, para. 1, item 9, letter "v" LACISOCI, which is subject to and complies with rules adopted by the respective competent authority, which are at least as strict as the requirements defined by European Union law, must be an issuer that is subject to and complies with prudential supervision rules, as well as meets one of the following conditions:

1. to have its seat in a country belonging to the European Economic Area;
2. to have its seat in a country - party to the Agreement on the Organisation for Economic Co-operation and Development, belonging to the Group of Ten;
3. to have a credit rating determined, not lower than investment grade, assigned by a credit rating agency registered or certified in accordance with Regulation No. 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies (OJ, L 302/1 of 17 November 2009), hereinafter referred to as "Regulation (EU) No. 1060/2009";
4. it can be proven by the Commission based on in-depth analyses of the person that the prudential rules it complies with are as strict as the requirements defined by European Union law.

Art. 16. (Amended - State Gazette, No. 55 of 2022.) (1) (Repealed - State Gazette, No. 55 of 2022).
(2) The banking line for ensuring liquidity is a banking facility provided by an institution that meets the requirements under Art. 38, para. 1, item 9, letter "v" LACISOCI.

Art. 17. (1) Derivative financial instruments under Art. 38, para. 1, items 7 and 8 LACISOCI are liquid if their underlying assets consist of one or more:

1. assets listed in Art. 38, para. 1 LACISOCI, including financial instruments that have one or more characteristics of these assets;
2. interest rates;
3. currency or exchange rates;
4. financial indices.
   (2) Over-the-counter derivative instruments should also meet the requirements under Art. 38, para. 1, items 8, letters "b" and "v" LACISOCI;

Art. 18. (1) Derivative financial instruments under Art. 38, para. 1, items 7 and 8 LACISOCI should include instruments that meet the following criteria:
1. allow the transfer of the credit risk of the underlying assets under Art. 17, para. 1, item 1, separately from other risks associated with the asset;
2. through them, delivery or transfer, including by cash payment, of assets other than those in Art. 38, para. 1 and 2 LACISOCI cannot be carried out;
3. meet the criteria for over-the-counter derivative instruments under Art. 38, para. 1, item 8, letters "b" and "v" LACISOCI and para. 2 and 3;
4. the risks associated with them are respectively covered by the risk management rules of the collective investment scheme, as well as by internal control mechanisms in the case of information asymmetry risk between the collective investment scheme, on the one hand, and the counterparty to the derivative financial instrument for the transfer of credit risk, on the other, arising from potential access of the counterparty to internal/non-public information regarding the enterprises whose assets are underlying for the derivative financial instrument for the transfer of credit risk.
(2) The fair value of derivative financial instruments under Art. 38, para. 1, item 8, letter "v" LACISOCI is the price at which assets can be exchanged and obligations under them settled between well-informed and consenting unrelated parties in a transaction. (3) The reliable and verifiable valuation of derivative financial instruments under Art. 38, para. 1, item 8 LACISOCI corresponds to the fair value under para. 2, as it is not based solely on market quotes from the counterparty and meets the following criteria:
1. the basis for valuation is a reliable and current market price of the instrument, and in cases where such a price is not available, the valuation is carried out based on a pricing model that uses a suitable generally accepted methodology;
2. the verification of the valuation is carried out in one of the following ways:
a) by a suitable third party, independent of the counterparty to the transaction with the derivative financial instrument traded on the over-the-counter market, which carries out the checks frequently enough and in a manner that allows the collective investment scheme to check the correctness of the valuation; b) by a unit in the management company that manages the collective investment scheme, which has the necessary human and technical resources for this and is independent of the department that manages the assets. (4) Liquid financial assets under Art. 38, para. 1, item 8 LACISOCI do not include derivative financial instruments with an underlying asset - commodities. (5) The additional liquid assets under Art. 38, para. 4 LACISOCI include the cash on hand of the collective investment scheme.

Art. 19. (Amended - State Gazette, No. 55 of 2022.) (1) The collective investment scheme may invest in derivative financial instruments with an underlying asset - financial indices under Art. 38, para. 1, items 7 and 8 LACISOCI, if the financial indices meet the following conditions:

1. are sufficiently diversified, if the following criteria are met:
   a) the index is composed in such a way that the price movement and trading activity of one component of the index do not significantly affect the entire index; b) if the index is composed of assets under Art. 38, para. 1 LACISOCI and its composition is diversified at least as much as the composition of the indices under Art. 46 LACISOCI; c) if the index is composed of assets other than those under Art. 38, para. 1 LACISOCI, its composition is diversified in a manner equivalent to that of the indices