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Bulgarian Capital Market

fin-market-bgThe first Bulgarian stock exchange was established in Sofia in 1914, and in 1933, thirty companies were listed and traded on it, the stock exchange gradually increasing its speed. In 1947 it ceased its activities.

The Bulgarian capital market was re-established in 1991 after the National Assembly passed the Act on Commerce and thus conditions were created for the establishment and operation of companies. In the same year, the first Bulgarian stock exchange was established.

In 1995 the first regulatory act governing the relations of the capital market was adopted – the Securities, Stock Exchanges and Investment Companies Act (SSEICA), creating a special supervisor of the securities market – the Securities and Stock Exchanges Commission (SSEC).

In the period 1995 – 1996 the infrastructure of the capital market was established by creating the Bulgarian Stock Exchange, which brought together several regional stock exchanges and the “Central Depository” (CD) was established. Based on the decision for the mass privatization of state owned enterprises the latter were transformed into joint stock companies in the period 1996-1997 more than 80 privatization funds. Were created

In 1997, the Bulgarian Stock Exchange merged with the Sofia Stock Exchange, the name of the new securities market was designated as “Bulgarian Stock Exchange – Sofia” (BSE). In the same year BSE was licensed by the SSEC and after the major amendments in 1998 in the SSEICA and the introduction of the definition of a public company (PC) all public companies were listed on the BSE, including privatized through public offering of shares state owned enterprises   as well as transformed into holdings former privatization funds and six investment companies created on the basis of the transformation of the privatization funds. Until that moment there were companies that were traded on stock exchanges – in the period 1992-1996 there were about 80 companies that however did not operate under any special regulations governing their activity.

The amendment of the SSEIC gave one month to the companies that met the definition of PC to submit documents for registration in register of public companies kept by the SEC. The main reason for the creation of PCs was the mass privatization and the legal restriction imposed on privatization funds to trade shares acquired in the process of the mass privatization only on a stock exchange (after dropping the ban on trade).The shares of approximately 1,000 companies came into the possession of several millions of investors. Within one year about 950 PCs were entered in the Register of the Commission – almost all of them having become public companies as a result of the mass privatization.

In that period licenses were issued to the first investment intermediaries which already in 1997 established its trade organization to protect their interests – the Bulgarian Association of Licensed Investment Intermediaries (BALII).

As of currently, about 350 PCs are traded on the BSE, out of which about 200 are in less liquid. The shares of the public companies are dematerialized and freely transferable. The PCs legal regime is based on full transparency and accountability with regard to their activities and financial results, and various guarantees are established for the protection of the rights of the shareholders, with particular emphasis on the protection of rights and interests of minority shareholders.

In the subsequent period the current Law on Public Offering of Securities (LPOS) was adopted, based on the European legislation in the field of capital market regulation and the Commission received the name Bulgarian National Securities Commission (BNSC).

In 2000, BSE introduced the completely automated trading system RTS Plaza, the same year it launched the stock index SOFIX, and in 2003 the Stock Exchange set up an Internet-based application for on line access to the BSE – COBOS. Since 2007, the electronic trading system of Deutsche Boerse Xetra® is in operation, functioning as a trading platform of the BSE that creates new functionalities for the investment intermediaries and their customers. CD also introduces a new trading system, allowing the clearing and settlement of transaction in securities and it continues to function also as the primary register of transactions and ownership of dematerialized securities.

Since 2003, the Financial Supervision Commission (FSC) is the capital market regulator – it is an independent body supervising and regulating the capital market, pension and insurance, which was established by means of the merger of the BNSC and the agencies for pension funds and insurance supervision.

In the period 1995-2014 were adopted numerous laws and regulations that form the legal basis of the public offering and trade in financial instruments. The system is fully harmonized with the applicable European legislation.

The favorable tax regime, the Bulgarian legislation synchronized with acquis communautaire of the European Union in the field of financial market regulation, the high regulatory and supervisory requirements applicable to investment intermediaries and other market participants, as well as the established state-of-the art market infrastructure of the BSE and CD create conditions for the gradual and progressive development of the Bulgarian capital market in the subsequent years.