Bulgaria: new regime for Alternative Investment Funds managers

A new licensing regime is to be introduced for managers of Alternative Investment Funds (AIFs) under draft legislation that has already been approved at first reading.

The changes, which implement EU law, apply to managers of a wide range of investment funds (including private equity and hedge funds), thus bringing the activities of many currently unregulated fund managers under the supervision of Bulgaria’s Financial Supervision Commission (FSC).

AIFs managers in Bulgaria would have to get licensed in advance by the FSC if:

• the total value of their asset portfolio (including any assets acquired using leverage) exceeds €100 million (or its equivalent in Lev)
• the total value of their asset portfolio exceeds €500 million (or its equivalent in Lev) where the portfolio consists of unleveraged AIFs with no redemption rights exercisable within 5 years of the date of initial investment.

AIFs managers in Bulgaria managing assets with a value below these thresholds would not require a license but would need to become registered with the FSC.

As the thresholds seem quite high, most AIFs managers operating in Bulgaria will have to register but will probably not need to be licensed by the FCS. However, licensing will be compulsory (even where the thresholds are not reached) for anyone from a non-EU country for which Bulgaria is a member state of reference who wishes to manage or market AIFs within the EU.

The granting of a license will give the AIFs manager a ‘passport’ to operate throughout the EU without needing any further licenses, as long as they comply with the laws of the relevant member state (including notifying the FCS of their intention to act in another EU member state).

All AIFs managers will also have to comply with various minimum organisational and operational requirements, such as capital adequacy and liquidity requirements, risk management rules and obligations of disclosure to the FCS and investors.

All applications to be licensed would have to be made by 22 July 2014, except for those managing closed-end funds that:

• will not be making any additional investments after the legislation has come into force, or
• are established for a fixed term expiring on or before 22 July 2016 and are closed to new investors.

All applications for registration would have to be made within one month after the date on which the legislation has come into force.

Law: amendments to the Collective Investment Schemes and other Undertakings for Collective Investments Act; implementation of Directive 2011/61/EC on Alternative Investment Fund Managers.