Legitimate brokers

Campaign “Recognise the licensed investment intermediary”

The Bulgarian Association of Licensed Investment Intermediaries (BALII) launches the information campaign “Recognise the licensed investment intermediary”.

BALII has prepared an informative text in Q&A form with the 10 signs which would allow the members of the public to recognise the licensed and unlicensed investment intermediaries. The article, along with the campaign logo will be published on the websites of all BALII members and will also be disseminated among media and partnering organisations.

The purpose of the information campaign “Recognise the licensed investment intermediary” is to tell the members of the public how to recognise the law abiding brokers, tell them apart from the dishonest and illegal intermediaries and what to do to avoid scams.

10 signs: How to tell the licensed investment intermediary from the unlicensed

1. How can I find out whether the investment intermediary is licensed to offer investment services?

Investments and trading on the financial markets across the world are carried out only through licensed investment intermediaries, banks and asset management companies, which receive a license for these activities and are supervised by a supervisory body of the country they are registered in. In Bulgaria the national competent body is the Commission for Financial Supervision (FSC).

You may receive a phone call or an investment offer from an unlicensed intermediary. They can even show you a fake license. This is why, before using the service, first you need to check whether it is licensed by FSC at https://www.fsc.bg/?lang=en. Look in section “Capital Activity”, subsection “Lists of Supervised Entities”, “Investment Firms” or for asset management companies: “Capital Activity”, subsection “Lists of Supervised Entities”, “Management companies” or call the Commission’s toll free number +359 800 40 444 and make an inqury.

2. Can I recognise the unlicensed investment intermediary by its website?

Yes, on the FSC website, in the section “Capital Activity”, subsection “Lists of Supervised Entities”, “Investment Firms” is published information about the license of the intermediary and the websites through which it offers its services. The investment intermediaries do not have the right to provide services through websites different than the ones they have declared to the respective competent bodies of the member states.

On its website, in the section “For the Consumers”, subsection “Warnings” FSC provides a list with information on persons and internet platforms that perform investment activities and offer investment services without a license. This list is updated regularly based on consumer complaints and information FSC obtained through official channels.

3. Does a foreign investment intermediary need a Bulgarian license?

The investment intermediaries registered in another EU country need to have a license from the respective supervisory body of the country of establishment. In order to carry out their activities, those companies are required to have submitted a notification to FSC in order to offer their services (including services via the internet) in Bulgaria. The complying European brokers are included in the list on the FSC website, in the section “Capital Activity”, subsection “Lists of Supervised Entities”, “Investment Firms”.

If the broker shows you a license issued by a third country (not an EU member), then they do not have the right to offer their services in Bulgaria, before registering a local branch and obtaining a license from the FSC. You can check whether they have a license in Bulgaria at the FSC website, in the section “Capital Activity”, subsection “Lists of Supervised Entities”, and by calling the Commission’s toll free number +359 800 40 444.

4. Do I have to sign some kind of contract with the investment intermediary in order to invest?

The licensed investment intermediaries are obliged to conclude an agreement with the person to whom they offer the service. If someone offers a service related to financial markets without being licensed and without concluding an agreement with you, this is a sign of fraud. Before depositing any funds via a bank transfer or online through a payment portal with a credit or a debit card, you should check with FSC whether the intermediary is licensed and only after that to conclude an agreement with them. You can check the foreign intermediaries on the websites of the respective supervisory bodies. If an intermediary demands that you deposit money in a phone call or a conversation on Facebook (or another social medium), it is very likely that you might fall victim to a fraudulent scheme. The licensed intermediary will never ask for money before signing a contract.

5. What should I look for when signing a contract to make sure that the investment intermediary is licensed?

When signing a contract with a licensed investment intermediary, its name in the contract should be identical to the name of the intermediary in the registers of the Commission. It is not allowed for the name of the intermediary to be different from the name of the company which obtained a license from the respective supervisory body. Another identification sign of the intermediaries established in Bulgaria is the unified identification code (EIK). It must be identical to that in the FSC registers. The name of the holder (the investment intermediary) of the bank account to which you deposit money must be fully identical to the name in the FSC register.

The contracts between licensed investment intermediaries and clients are signed by the company representatives or authorised persons which have been verified by FSC and are entered in a register. Anyone can check the names of the legal representatives of the investment intermediary in the FSC register or in the Commercial register. The persons who are authorised 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 and sale of securities, can be checked in the listing of the investment intermediary.

Usually when an unlicensed intermediary has convinced you on the phone to invest urgently, you may receive through a courier an address and a broker contract for deals with financial instrument signed by the intermediary, but without the name of the signee and their position. It is possible that the fake intermediaries send a contract bearing the name of an investment intermediary who has a license for investment activities. However, the bank accounts where the investor deposits their funds are held by a company with a name similar to that of the licensed intermediary named in the contract. The purpose is to mislead the investor that they deposit their funds with a licensed investment intermediary.

6. What do I have to keep in mind when I transfer money to an investment intermediary?

Payments to licensed intermediaries can be done in their offices in cash for up to BGN 10 000, via a bank transfer or online. All cash payments are made in the registered offices of the intermediary. There are occasions when unlicensed intermediaries conclude an agreement with the client but tell them to transfer money to a bank account different than the one in the agreement. The licensed investment intermediary will use the same bank account as the one in the contract. The name of the recipient of the money transfer should be identical to the name of the licensed investment intermediary entered in the register of FSC.

7. How to recognise the offices of a licensed and an unlicensed intermediary?

The correspondence address of the licensed investment intermediary, as well as its office locations are listed in the register of FSC. You can also call the toll free number of FSC +359 800 40 444.

8. How can I find out whether I am getting a phone call from a licensed or an unlicensed intermediary?

If you get a phone call promising you yield of 50%-100% over a short period of time, without explaining the risks of financial markets, this is a sign of fraud as those are unrealistic results. The licensed intermediary always explains that there is no guaranteed profit from the financial markets and that the high yield comes with high risk. Investing in any financial instrument brings risk.

In most cases the fake brokers insist that the client decides quickly and open an account and deposit money at first opportunity, on the same day. Usually the unlicensed intermediaries get their hands on personal data and contacts illegally. When receiving a call with an investment offer the investor should inquire where the caller got their number from. The evasive and hesitant answers in the general case suggest that this is a scam.

9. Do they have the right to manage my money?

Be careful with who is offering to manage your money. If someone offers to invest money on your behalf, you must check whether they comply with the legal requirements. Management of all kinds of financial assets (including shares) is carried out only by licensed investment consultants working in a financial institution. The licensed investment consultants, as well as all licensed brokers who are allowed to conclude deals on the Bulgarian stock exchange on behalf of clients, are listed in the public register on the website of FSC.

Anyone can check this information by calling FSC’s toll free number +359 800 40 444.

10. What protection do I have of my investments?

The assets of investors who are clients of investment intermediaries licensed in Bulgaria and members of the Investor Compensation Fund are protected. The protection covers up to 90% of the assets, but not more than BGN 40 000. The compensations are paid out by the Fund in cases of a deteriorating financial situation of the investment intermediary and/or when it loses its license on legal grounds. A list of the licensed intermediaries who have the right to hold client securities and funds and who make a contribution to the Fund are available on its website.

For verification and information you may turn directly to the Commission for Financial Supervision:

Toll free number - 0800 40 444

Contacts of FSC for complaints and warnings