Ordinance No. 46 of 11.04.2012 on the Procedure and Method for Paying Compensation from the Investor Compensation Fund

ORDINANCE No. 46 of 11.04.2012 on the Procedure and Method for Paying Compensation from the Investor Compensation Fund

Pub. - State Gazette, No. 33 of 27.04.2012; amended and supplemented, No. 40 of 13.05.2014; amended and supplemented, No. 34 of 23.04.2019; amended and supplemented, No. 66 of 20.08.2019; amended, No. 20 of 11.03.2025, effective from the date of introduction of the euro in the Republic of Bulgaria

Adopted by Decision No. 134-N of 11.04.2012 of the FSC

Chapter One
GENERAL PROVISIONS

Art. 1. (Amend. - SG, No. 40 of 2014; amended and supplemented, No. 34 of 2019; amended and supplemented, No. 66 of 2019.) (1) (Amend. and supplemented - SG, No. 66 of 2019.) This Ordinance regulates the procedure and method for paying compensation from the Investor Compensation Fund (the Fund) to the clients of an investment intermediary, a management company, and the person managing alternative investment funds, using the funds collected in the Fund in cases where the investment intermediary, respectively the management company, providing services under Art. 86, para. 2, item 2 of the Law on Collective Investment Schemes and Other Collective Investment Undertakings (LCISOCIU) or the person managing alternative investment funds, providing services under Art. 198, para. 5, item 1 LCISOCIU, is unable to fulfill its obligations to its clients due to reasons directly related to its financial condition.

(2) (Suppl. - SG, No. 66 of 2019.) The Fund pays compensation to the clients of the investment intermediary, the management company, or the person managing alternative investment funds, up to the limits provided for in Art. 77g of the Law on Public Offering of Securities (LPOS), in cases where:

1. (Suppl. - SG, No. 66 of 2019.) a decision of the respective district court for the investment intermediary, respectively the management company or the person managing alternative investment funds, has opened insolvency proceedings, including when the insolvency proceedings have been terminated on the basis of Art. 632 of the Commercial Law;

2. (Amend. - SG, No. 34 of 2019.) the license, respectively the permit, to carry out activities as an investment intermediary has been revoked by a decision of the competent authority in the cases under Art. 27, para. 1, item 6 of the Law on Markets in Financial Instruments, and with regard to investment intermediaries that are banks - in the cases under Art. 36, para. 2 of the Law on Credit Institutions;

3. (New - SG, No. 34 of 2019.) a decision of the Commission for Financial Supervision has established that the following conditions exist simultaneously:
   a) (Amend. - SG, No. 66 of 2019.) the financial instruments and/or cash funds held by the investment intermediary, respectively the management company or the person managing alternative investment funds, on behalf of its clients, are not available in the accounts in which client assets are kept, for reasons other than the performance of contractual relations with the clients; b) (Amend. - SG, No. 66 of 2019.) in the opinion of the Commission for Financial Supervision, at that moment the investment intermediary, respectively the management company or the person managing alternative investment funds, is unable, for reasons directly related to its financial condition, to pay the cash funds to the clients, respectively to return the financial instruments, and will not be able to do so in the short term;

4. (Previous item 3 - SG, No. 34 of 2019; amend., No. 66 of 2019.) the license to carry out activities as a management company has been revoked by a decision of the competent authority in the cases under Art. 100, para. 1, item 5 LCISOCIU;

5. (New - SG, No. 66 of 2019.) the license to carry out activities as a person managing alternative investment funds has been revoked in the cases under Art. 204, para. 1, item 5 LCISOCIU.

(3) (New - SG, No. 34 of 2019.) The decisions under para. 2, item 3, letters "a" and "b" are taken upon proposal by the Deputy Chairman, heading the "Supervision of Investment Activity" Directorate.

(4) (Amend. - SG, No. 40 of 2014; previous para. 3, No. 34 of 2019.) In the event of the occurrence of events analogous to those under para. 2, which are grounds for paying compensation according to the respective legislation, the Fund pays compensation, respectively additional compensation under item 2, up to the limits provided for in Art. 77g LPOS, as follows:

1. (Amend. - SG, No. 66 of 2019.) to the clients of branches of an investment intermediary from a third country in the Republic of Bulgaria, a management company from a third country in the Republic of Bulgaria, or a person managing alternative investment funds from a third country in the Republic of Bulgaria, under the conditions of Art. 77a, para. 4 LPOS;

2. (Amend. - SG, No. 66 of 2019.) to the clients of branches of an investment intermediary from a Member State in the Republic of Bulgaria, a management company from a Member State in the Republic of Bulgaria, or a person managing alternative investment funds from a Member State in the Republic of Bulgaria, under the conditions of Art. 77a, para. 5 LPOS.

(5) (Previous para. 4, amend. - SG, No. 34 of 2019; amend., No. 66 of 2019.) The Fund's notice under Art. 77b, para. 5 LPOS shall also include information for the clients of the investment intermediary, the management company, or the person managing alternative investment funds, in insolvency proceedings, that they have the right to assert their claims also under the procedure of the Commercial Law.

Chapter Two
DETERMINING THE AMOUNT OF THE CLIENT'S CLAIM AGAINST THE INVESTMENT INTERMEDIARY, THE MANAGEMENT COMPANY OR THE PERSON MANAGING ALTERNATIVE INVESTMENT FUNDS

(Title amend. - SG, No. 66 of 2019)

Art. 2. (Amend. - SG, No. 34 of 2019; amended and supplemented, No. 66 of 2019; amend., No. 20 of 2025, effective from the date of introduction of the euro in the Republic of Bulgaria) (1) (Amend. - SG, No. 66 of 2019; amend., No. 20 of 2025, effective from the date of introduction of the euro in the Republic of Bulgaria.) The total amount of a single client's claim subject to compensation is established in euros and represents the sum of the value of all the client's claims against the investment intermediary, the management company, or the person managing alternative investment funds, arising as a result of the intermediary's or management company's inability to return a specific client asset, in accordance with applicable legal and contractual conditions.

(2) (Amend. - SG, No. 66 of 2019.) The value of a specific client's claim against an investment intermediary, management company, or person managing alternative investment funds, arising as a result of the intermediary, management company, or person managing alternative investment funds' inability to return a specific client asset, is equal to the valuation of that asset, carried out as of the date of the decision under Art. 1, para. 2 or the occurrence of the event under Art. 1, para. 4, in accordance with the requirements defined in Ordinance No. 23 of 2006 on the Conditions and Procedure for Valuation of Client Assets (pub., SG, No. 19 of 2006; amend., No. 82 of 2007 and No. 32 of 2008).

(3) (Amend. - SG, No. 20 of 2025, effective from the date of introduction of the euro in the Republic of Bulgaria.) In cases where client assets are in a currency other than the euro, when establishing the amount of the claim under para. 1, their equivalent value in euros is calculated using the reference exchange rates of the euro against foreign currencies published by the Bulgarian National Bank (BNB) on its website, valid as of the date of the decision under Art. 1, para. 2 or the occurrence of the event under Art. 1, para. 4.

(4) In the cases under Art. 1, para. 4, item 1, the compensation provided by the Fund is for the difference exceeding the compensation provided by the investor compensation system in financial instruments at the seat of the investment intermediary.

(5) (Amend. - SG, No. 66 of 2019.) In cases where the client has obligations to the investment intermediary, the management company, or the person managing alternative investment funds, when determining the value of the claim under para. 1, the amount of the obligations is deducted.

Chapter Three
INFORMATION ON CLIENT ASSETS

Art. 3. (Amend. - SG, No. 34 of 2019; amended and supplemented, No. 66 of 2019; amend., No. 20 of 2025, effective from the date of introduction of the euro in the Republic of Bulgaria) (1) (Suppl. - SG, No. 66 of 2019.) Within thirty days from the date of the decision under Art. 1, para. 2 or the occurrence of the event under Art. 1, para. 4, the appointed curator, liquidator, or trustee is obliged to submit to the Board of Directors of the Fund written information on the client assets of each client of the investment intermediary, respectively the management company or the person managing alternative investment funds.

(2) The information under para. 1 is submitted on paper and electronic media and contains data regarding:

1. client identification:
   a) for natural persons - full name, registered address, personal identification number (EGN), ID card number, respectively analogous data for foreign persons; b) for legal entities - name, seat, management address, representative office, unique identification code (BULSTAT code), respectively analogous data for foreign persons;

2. presence or absence of obstacles to the payment of compensation under Art. 77g, para. 2 and 3 LPOS and documents certifying the presence of obstacles;

3. client assets:
   a) type and description of the respective client assets; b) (Amend. - SG, No. 66 of 2019.) legal basis for the arising of the client's claims under Art. 77v, para. 1 LPOS against the investment intermediary, management company, or person managing alternative investment funds, in connection with each client asset; c) value of each client asset according to its valuation as of the date of the decision under Art. 1, para. 2 or the occurrence of the event under Art. 1, para. 4; d) information in cases where client assets belong to more than one person, including data on the persons; e) information in cases where the client has acted on behalf of another person, including information on the person and/or persons on whose behalf the client has acted; f) information in cases where encumbrances and securities (seizures, pledges, etc.) and modalities have been imposed on the client assets, specifying the legal act by which they were imposed and the person in whose favor they were imposed; g) (Amend. - SG, No. 20 of 2025, effective from the date of introduction of the euro in the Republic of Bulgaria.) currency in which the respective client asset is denominated, and its equivalent value in euros, using the reference exchange rates of the euro against foreign currencies published by the Bulgarian National Bank on its website, valid as of the date of the decision under Art. 1, para. 2 or the occurrence of the event under Art. 1, para. 4; h) total value of client assets of one person according to their valuation as of the date of the decision under Art. 1, para. 2 or the occurrence of the event under Art. 1, para. 4.

(3) (Suppl. - SG, No. 66 of 2019.) When the client has obligations to the investment intermediary, respectively the management company or the person managing alternative investment funds, the information under para. 1 also contains data regarding:

1. legal basis for the arising of the respective obligation;
2. modalities;
3. structure of obligations with clarification of principal, interest, and expenses;
4. total amount of obligations;
5. presence of court disputes regarding the existence, enforceability, and amount of obligations;
6. currency in which the obligations are denominated;
7. (Amend. - SG, No. 20 of 2025, effective from the date of introduction of the euro in the Republic of Bulgaria.) for an obligation in a currency other than the euro - its equivalent value in euros, using the reference exchange rates of the euro against foreign currencies published by the Bulgarian National Bank on its website, valid as of the day of the decision under Art. 1, para. 2 or the occurrence of the event under Art. 1, para. 4;
8. total value of client assets of one person according to their valuation as of the date of the decision under Art. 1, para. 2 or the occurrence of the event under Art. 1, para. 4 after deducting the obligations of the respective client.

(4) The following are attached to the information under para. 1:

1. (Suppl. - SG, No. 66 of 2019.) a list of the members of the management and supervisory bodies of the investment intermediary, respectively the management company or the person managing alternative investment funds, as well as its procurators as of the date of the decision under Art. 1, para. 2 or the occurrence of the event under Art. 1, para. 4;

2. (Suppl. - SG, No. 66 of 2019.) a list of persons who directly or indirectly own 5 or more than 5 percent of the votes in the general meeting of the investment intermediary, respectively the management company or the person managing alternative investment funds, as of the date of the decision under Art. 1, para. 2 or the occurrence of the event under Art. 1, para. 4;

3. (Amend. - SG, No. 66 of 2019.) a list of persons who as of the date of the decision under Art. 1, para. 2 or the occurrence of the event under Art. 1, para. 4 can control the investment intermediary, respectively the management company or the person managing alternative investment funds, as well as a list of persons belonging to the same group to which the investment intermediary, respectively the management company or the person managing alternative investment funds, belongs, for which consolidated reports are prepared;

4. (Suppl. - SG, No. 66 of 2019.) data on the registered auditor who audited the annual financial report of the investment intermediary, respectively the management company or the person managing alternative investment funds, for the year preceding the date of the decision under Art. 1, para. 2 or the occurrence of the event under Art. 1, para. 4;

5. (Amend. - SG, No. 34 of 2019.) a list of professional clients within the meaning of § 1, item 10 of the Additional Provisions of the Law on Markets in Financial Instruments as of the date of the decision under Art. 1, para. 2 or the occurrence of the event under Art. 1, para. 4.

(5) The Board of Directors of the Fund may require other additional information necessary for calculating the amount of the client's claims subject to compensation.

(6) Within three days from the date of becoming aware, the curators, liquidators, or trustees notify the Board of Directors of the Fund:

1. about received new data or changes in the provided information;
2. (Suppl. - SG, No. 66 of 2019.) about cases of filed court cases against the investment intermediary, respectively the management company or the person managing alternative investment funds, by persons who claim to have a claim subject to compensation.

Chapter Four
SERVICING BANK

Art. 4. (Amend. - SG, No. 34 of 2019; suppl., No. 66 of 2019.) (1) (Suppl. - SG, No. 66 of 2019.) All payments of compensation to the clients of the investment intermediary, respectively the management company or the person managing alternative investment funds, on behalf of the Fund are carried out by a servicing bank.

(2.) A servicing bank may be a local bank or a bank from a Member State that carries out banking activities on the territory of the Republic of Bulgaria through a branch, as well as a bank from a third country that has received a license from the BNB to carry out banking activities on the territory of the country through a branch.

(3) (Amend. - SG, No. 34 of 2019.) The Board of Directors of the Fund, within the period and procedure under Art. 77b, para. 5 LPOS, announces the servicing bank.

Art. 5. (1) The servicing bank provides monthly and upon request from the Board of Directors of the Fund written information on the paid-in cash or account sums as compensation for clients of the investment intermediary or management company.

(2) The Board of Directors of the Fund notifies the liquidators or trustees of the investment intermediary, respectively the management company, of the amount of the compensation paid by the Fund to clients.

Chapter Five
APPLICATION FOR PAYMENT OF COMPENSATION

Art. 6. (Amend. - SG, No. 34 of 2019; suppl., No. 66 of 2019.) Within 1 year from the date of publication of the Fund's notice under Art. 77b, para. 5 LPOS, each client of the investment intermediary, respectively the management company or the person managing alternative investment funds, has the right to submit a written application to the Board of Directors of the Fund for payment of compensation, unless the failure to meet the deadline is due to special unforeseen circumstances that the client could not overcome.

Art. 7. (Suppl. - SG, No. 40 of 2014.) (1) The application for payment of compensation from a client - natural person, is submitted personally or through an attorney-in-fact, authorized by a specific power of attorney with a notarized signature. Attached to the application is a declaration regarding the absence of circumstances under Art. 77g, para. 2, items 2, 4, 13, and 14 and para. 3 LPOS and regarding the presence or absence of an accusation under Art. 77z LPOS, the power of attorney, when the application is submitted through an attorney-in-fact, and evidence of the unforeseen circumstances in the cases under Art. 77f, para. 2 LPOS.

(2) The application for payment of compensation from a client - legal entity, is submitted through the legal representatives of the person or through an attorney-in-fact, authorized by them by a specific power of attorney with a notarized signature. Attached to the application for payment of compensation are:

1. data on the unique identification code or a certificate of current status from the respective commercial register, issued no earlier than 3 months before the date of the application - for foreign persons;
2. power of attorney, when the application is submitted by an attorney-in-fact;
3. declaration from the legal representatives of the person regarding the absence of circumstances under Art. 77g, para. 2, items 2, 13, and 14 LPOS with regard to the legal entity;
4. evidence of the unforeseen circumstances - in the cases under Art. 77f, para. 2 LPOS.

(3) The application for payment of compensation is accompanied by documents certifying its justification.

(4) (New - SG, No. 40 of 2014.) The written form of the application for payment of compensation is considered observed if the application is submitted electronically, signed with an electronic signature.

Art. 8. (Amend. - SG, No. 40 of 2014.) (1) The Chairman of the Board of Directors of the Fund carries out a check of the regularity of the received applications for payment of compensation in accordance with the requirements of the previous article.

(2) (Amend. - SG, No. 40 of 2014.) If, as a result of the check under para. 1, incompleteness or irregularities in the submitted application are established, within a 10-day period from the receipt of the application, the Chairman of the Board of Directors of the Fund sends a notice to the client requesting their elimination or the submission of additional information and data, setting a sufficient period for this.

(3) The period under the previous paragraph may be extended by a decision of the Chairman of the Board of Directors of the Fund upon request by the person who submitted the application, and in the presence of valid reasons.

Art. 9. (1) By decision of the Board of Directors of the Fund, the application is left unexamined when:

1. the application was not submitted within the period under Art. 77f, para. 2 LPOS and there are no special unforeseen circumstances with regard to the respective person;
2. if within the period set by the Chairman of the Board of Directors under the procedure of Art. 8, para. 2 and 3, the irregularities of the application were not eliminated.

(2) Within a three-day period from the date of the meeting of the Board of Directors of the Fund, at which the decision under para. 1 was adopted, it is sent to the person who made the application.

Chapter Six
PROCEDURE FOR TAKING A DECISION ON PAYMENT OF COMPENSATION

Art. 10. (Amend. - SG, No. 40 of 2014; amend., No. 34 of 2019; amended and supplemented, No. 66 of 2019.) (1) (Amend. - SG, No. 66 of 2019.) The Chairman of the Board of Directors of the Fund sends for opinion to the curator, liquidator, or trustee of the investment intermediary, the management company, or the person managing alternative investment funds a copy of the application for payment of compensation within a 7-day period from its receipt, and if it is irregular - within a 7-day period from the elimination of the irregularities of the application.

(2) (Amend. - SG, No. 40 of 2014.) The curator, liquidator, or trustee gives a written opinion on the justification of the application for payment of compensation within a 30-day period from its receipt.

(3) The opinion under para. 2 also specifies: the type and description of the client assets; the presence of the circumstances under Art. 77g, para. 2 LPOS with regard to the person who made the application; data necessary for the valuation of the respective client assets, as well as whether from the date of the decision under Art. 1, para. 2 or the occurrence of the event under Art. 1, para. 4 to the date of the compensation application, the person has received payment and in what amount from the investment intermediary, respectively the management company, for claims arising in connection with the client assets, subject of the application.

(4) The following documents are attached to the opinion under para. 2:

1. the contracts or other documents representing the basis for the arising of the client's claims under Art. 77v, para. 1 LPOS;
2. legal acts regarding imposed encumbrances and securities (seizures, pledges, etc.) and modalities with regard to client assets - subject of the application;
3. documents regarding the person on whose behalf the client has acted - in cases where the client has acted on behalf of another person;
4. written data and/or documents certifying the presence of circumstances under Art. 77g, para. 2 and 3 and Art. 77z LPOS;
5. written data and/or documents necessary for the valuation of the client assets - subject of the application;
6. (Amend. - SG, No. 66 of 2019.) written data and documents regarding the amount of the client's obligations to the investment intermediary, management company, or person managing alternative investment funds.

(5) In the process of examining the application for payment of compensation, the Chairman of the Board of Directors of the Fund has the right at any time to require additional information and documents from the person who made the application, as well as from the curator, liquidator, or trustee.

(6) After receiving the opinion under para. 2 or after the expiration of the period under para. 2, when no opinion has been received, the Chairman of the Board of Directors of the Fund organizes the carrying out of the valuation of the client assets of the person who made the application, under the procedure and conditions specified in the ordinance under Art. 77v, para. 3 LPOS.

Art. 11. (1) Based on the collected information and written documents in connection with the application for payment of compensation, the Board of Directors of the Fund by decision:

1. establishes whether there is a claim subject to compensation;
2. approves the valuation of the client assets and determines the amount of the claim subject to compensation;
3. determines the amount of the compensation;
4. declares whether the conditions for suspending the payment of compensation on the basis of Art. 77z LPOS exist;
5. in the presence of client assets, on which encumbrances have been imposed or which serve as security - under the procedure of Art. 77u, para. 5 LPOS, determines the corresponding corresponding part of the compensation that will not be paid to the client until the lifting of the encumbrance or security.

(2) The decision under para. 1 is taken within the period under Art. 77f, para. 3 LPOS, unless there is permission from the Commission for Financial Supervision to extend this period.

(3) Within a three-day period from the date of the meeting of the Board of Directors of the Fund, at which the decision under para. 1 was adopted, it is sent to the person who made the application.

Chapter Seven
PROCEDURE FOR PAYMENT OF COMPENSATION

Art. 12. (1) Within the period under Art. 11, para. 3, a certified copy of the decision under Art. 11, para. 1, with which it is established that there is a claim subject to compensation, is sent to the servicing bank together with identifying data for the respective person and other data according to the contract with the servicing bank.

(2) The person having the right to compensation,