The Bulgarian Association of Licensed Investment Intermediaries (BALII) is conducting an awareness campaign entitled “Recognize the Licensed Investment Intermediary” with the support and cooperation of the Financial Supervision Commission.

The BALII has prepared information material with 10 features by which citizens can distinguish licensed from unlicensed investment intermediaries, presented as questions and answers in accessible language. The information material together with the campaign logo was published on the websites of all BALII members and distributed to the media and partner organizations.

The purpose of the BALII awareness campaign “Recognize the Licensed Investment Intermediary” is to provide citizens with accessible information on how to distinguish legitimate investment intermediaries from unscrupulous and illegal intermediaries, and how to protect themselves from fraud.

The information material with the indicators for distinguishing a licensed intermediary from an illegal investment intermediary was also published by the Financial Supervision Commission.

10 indicators:

1. How to distinguish a licensed investment intermediary from an unlicensed one

Investments and trading on financial markets around the globe are carried out only through licensed investment intermediaries, banks and management companies that are licensed for this activity and are supervised by a supervisory authority in the country where they are registered. In Bulgaria, the national competent authority is the Financial Supervision Commission.

You may receive a phone call or investment proposal from an unlicensed intermediary who might even show you a fake license. Therefore, before using the services offered, you should check whether the intermediary is licensed by the Financial Supervision Commission (FSC) – at http://www.fsc.bg in the section “Registers and References”, subsection “Electronic Register and Records”, item 2 “Investment Intermediaries”, item 4 “Collective Investment Schemes”, item 5  “Sovereign Investment Funds”, item 6 “Management Companies”, as well as by calling the information center free of charge on 0800 40 444.

2. Can I recognize the unlicensed investment intermediary by their website?

Yes, on the FSC website http://www.fsc.bg in the section “Registers and References”, subsection “Electronic Register and Records”, item 2 “Investment Intermediaries” there is information about the license of the intermediary and the sites through which it offers its services. Investment intermediaries may not provide services through websites other than those submitted to the relevant competent authorities of the Member States! The FSC maintains on its website, section “For the Consumer”, subsection “Warnings for Consumers”, section “by the Financial Supervision Commission” a list of information about persons and Internet platforms that carry out investment activities and offer investment services without a license. This list is updated regularly, following complaints and signals from citizens, as well as other information to which the FSC has access.

3. If the investment intermediary is not Bulgarian, should they have a license from Bulgaria?

Investment intermediaries registered in another country in the European Union must be licensed by the relevant supervisory authority of the country in which they are established. To operate, these companies are obliged to submit a notification to the FSC when offering services on the territory of Bulgaria (this includes online services). European brokers who have complied with the law must be on the list on the website http://www.fsc.bg, in the Supervised Persons menu, subsection Notifications.

If your broker shows you a license issued by a country that is not in the European Union, they have no legal right to offer services in Bulgaria before they have registered a local branch that has received a license from the Financial Supervision Commission. You can check whether they have a license for Bulgaria on the FSC website http://www.fsc.bg in the section “Registers and References”, subsection “Electronic Register and Records”, item 2 “Investment intermediaries” as well as by calling free of charge the information center on 0800 40 444.

4. Do I have to sign a contract with an investment intermediary in order to invest?

Licensed investment intermediaries must enter into a contract with the person to whom they offer their services. If someone offers a service related to financial markets without being licensed and without concluding a contract with you, this is an indicator of fraud. Before investing in financial markets by bank, online through a payment operator by credit or debit card, you should check with the Financial Supervision Commission whether the intermediary is licensed and then enter into a contract with them. For foreign intermediaries, you could check for a license on the website of the relevant supervisory authority. If an intermediary asks you to transfer money to them only after a phone call or a conversation on Facebook (or another social network), you might fall into a fraudulent scheme. A licensed investment intermediary will never ask you to transfer money without a contract.

5. What should I watch for when signing a contract to make sure it is with a licensed investment intermediary?

When you conclude a contract with a licensed investment intermediary, its name in the contract coincides fully with the name of the intermediary in the Commission’s registers. It is illegal if the name of the intermediary is not identical to the name of the company that has received a license from the relevant supervisory authority. Another identification mark for the intermediaries established in the Republic of Bulgaria is the unique identification code (UIC), which must correspond to that in the FSC registers, by analogy – the name of the recipient (investment intermediary), holder of the bank account to which you must transfer money, should be fully identical to the name that appears in the FSC registers.

With licensed investment intermediaries the contracts with clients are signed jointly by not less than two of the company’s representatives or by persons authorized by them, who must be checked by the Financial Supervision Commission and entered in the Commercial Register and the Register of Non-Profit Legal Entities (CRRNPLE), which is public, and everyone has access to it. Anyone can check the names of the legal representatives of the investment intermediary in CRRNPLE. The persons who have the right to sign a contract and to accept orders (the so-called persons under Art. 65, para 1, item 1 of Ordinance No. 38 on the requirements for the activity of investment intermediaries) for purchase or sale of securities, can be checked in the account of the specific investment intermediary in the FSC register. In item two – investment intermediaries, you select the intermediary by the first letter of their name, then select “Circumstances of the Investment Intermediary”, then “Persons concluding contracts and accepting orders for purchase and sale of securities”, this displays a list of all persons working for a specific intermediary, as well as the date from which the person works for this investment intermediary.

Usually, when an unlicensed intermediary persuades you to invest urgently over the phone, you receive by courier at a brokerage contract for transactions in financial instruments, which is signed by the investment intermediary, without specifying the name of the signatory, and in what capacity they are acting. It is possible that the fraudulent intermediaries may illegally send a contract on behalf of an investment intermediary that actually has a license to carry out investment activities, and the contract specifies bank accounts to which the investor can transfer funds needed to purchase the promised financial instruments, with the holder being a company with an extremely similar-sounding company name to that of the licensed investment intermediary it is impersonating. The aim is to mislead the investor that they are transferring money to the account of a licensed investment intermediary.

6. What should I keep in mind when transferring money to an investment intermediary?

Payments to licensed intermediaries are made in their offices at a cash desk up to BGN 10,000 or by bank transfer, as well as online. All cash payments are made in the registered offices of the licensed intermediaries – registered with the FSC. There are cases when unlicensed intermediaries enter into a contract with the client but tell them to transfer an amount to a bank account that is different from the one mentioned in the contract. Check that the specified bank account is listed in the contract. A licensed investment intermediary will indicate a bank account which is entered in the contract and will not use a different one. The name of the recipient of the money transfer should be identical to the name of the licensed investment intermediary in the register kept by the FSC.

7. How do I distinguish the offices of a licensed and unlicensed intermediary?

The correspondence address of the licensed investment intermediary, as well as its offices, must be listed in the FSC registers. In item two – investment intermediaries, you select the intermediary by the first letter of their name, then select “II Office Addresses”, Check on the FSC website or call 0800 40 444 free of charge.

8. How do I know if the person calling me is a representative of a licensed or unlicensed intermediary?

If the person calling you promises a return of 50% -100% for a short period of time, without explaining the risks of the financial markets, this is a signal of fraud as these are not realistic results. A licensed intermediary always explains that there is no guarantee of profit on the financial markets and that higher profitability is associated with higher risk. Investing in any financial instrument carries some risk. In most cases, fraudulent brokers insist that the client decide very quickly by opening an account and depositing funds as soon as possible on the same day. Unlicensed intermediaries usually obtain the personal data and contacts of the persons they contact in an unregulated manner. Upon receiving such a call, investors should inquire about where the person on the other end of the line has their data from, and hesitant and / or evasive responses are generally a sign of fraud.

9. When they offer to manage my money on my behalf, do they have the right?

Be careful who offers to manage your money. If someone offers to invest the money for you, you should check that they meet the legal requirements. The management of all types of financial assets (including transactions with shares on your behalf, etc.) is carried out only by licensed investment advisers working in a financial institution. Licensed investment advisers, as well as all licensed brokers who have the right to enter into transactions on the Bulgarian Stock Exchange AD on behalf of clients, are entered in the public register on the website of the Financial Supervision Commission (FSC) http: // www.fsc.bg. Anyone can also check by calling the FSC Information Center free of charge on 0800 40 444.

10. What protection do I have for the invested funds?

The assets of investors who are clients of investment intermediaries licensed in Bulgaria and participate with a fee in the Investor Compensation Fund (FCI), are protected up to 90% of the assets, but not more than BGN 40,000. The compensations shall be paid by the FCI in case of deteriorated financial condition of an investment intermediary and / or in case of revocation of an investment intermediary’s license, when there are certain legal grounds for revocation of the license. A list of licensed intermediaries who have the right to safekeep client securities and funds and who pay contributions to the Fund is published on the Fund’s website.

Ask and check in the Information Center of the Financial Supervision Commission www.fsc.bg.

You can read useful tips for preventing fraud from the Financial Supervision Commission USEFUL TIPS FOR POTENTIAL INVESTORS