The Markets in Financial Instruments Act (“MFIA”) underwent material changes in October 2019. The main purpose of the newly adopted amendments is to introduce measures on the application of Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012. Barring some exceptions such as the amendments introduced in the Public Offering of Securities Act (“POSA”) by virtue of the transitional provisions, the amendments entered into force on October 22nd, 2019 – the date of promulgation in the State Gazette.
Summary of the most significant amendments:
- A whole new Chapter introduced by way of the amendments regulates the settlement of transactions in securities and the central securities depositors. With a view to the importance of the central securities depositors and supporting the trust in the market participants that transactions in financial instruments are executed duly and in a timely manner, the amendments to the MFIA introduce measures ensuring the uninterrupted activity of the central securities depositors.
- Central securities depositors shall also have to prepare and support a recovery plan with the content envisaged in Delegated Regulation (EU) 2017/392, thus ensuring continuity of the CSD’s operations.
- In addition, the amendments to the MFIA aim to eliminate certain inaccuracies and gaps admitted by the legislator in the course of implementation of MiFID II. Notably, the amendments introduce changes to the legal framework governing the activity of tied agents in the cases where the agent is a legal entity. The amendments introduce requirements regarding the qualified shareholding in tied agents, approval of their board members, etc.
- Last but not least, the amendments to the MFIA introduce sanctions for violations of Regulation (EU) 909/2014. While the amount of the sanctions defends on the type of the infringement and on the offender themselves, it is notable that the amount of the fines may reach up to millions where the violation has been committed by a legal entity.
- The legislative amendments introduce novelties to the Credit Institutions Act related to the clear specification of the Bulgarian National Bank’s powers on the supervision under Regulation (EU) 909/2014. The BNB is defined as the competent authority on licensing of and supervision on central securities depositors upon provision of banking type ancillary activities and the banks specified for provision of banking type ancillary activities in accordance with Article 54, paragraph 2 of Regulation (EU) 909/2014.
- Significant amendments are also introduced to the POSA through the transitional provisions of the amending law. The POSA contains the legal framework regulating the activity of Central Depository AD, as a private entity, established by virtue of a law, with equity participation by the law. In the meantime, as Regulation (EU) 909/2014 establishes a number of requirements towards the activity of CSDs, the POSA also undergoes respective changes. The aim of the amendments in the POSA (all made through the transitional provisions of the law amending the MFIA) is to separate the function on keeping a central registry of non-materialized securities from the activity of central securities depository. A specific register of securities will be kept by the Central Depository AD containing information on securities of Bulgarian issuers or of issuers the securities of which are issued in accordance with Bulgarian legislation, thus ensuring that this activity of the Central Depository AD will be separated from the other activities of the CSDs.