Fibank Collective investments in transferable securities
Collective investments in transferable securities are:
Mutual funds are alternative for investment of available free cash funds. The client provides a certain amount of money by buying shares in the fund and the fund invests the money in different financial instruments. Mutual funds raise funds mainly from small, non-professional investors by investing them in different financial instruments. The risk in mutual funds is reduced also by creating a diversified portfolio of various financial instruments. Each investor, having bought shares in the fund, can sell them back when the net asset value of the company reaches 500 thousand BGN.
Index funds are a special type of investment schemes where a passive investment strategy is used in order to achieve a return on a certain index or market benchmark (a generally accepted market indicator). To avoid investing in each instrument, member of an index, for the investment purposes are used exchange-traded products on the underlying index such as ETF (exchange-traded funds), ETN, (exchange-traded notes), ETC (exchange-traded currencies/commodities).
Unlike mutual funds, the ETF (exchange-traded funds) have quotes throughout the entire session and their trading characteristics are similar to the ordinary shares. Most exchange-traded funds (ETF) reflect the movement of indices and sectors.
ETN (exchange-traded notes) are also traded on the leading stock exchanges and their performance is based on the market index after deducting the relevant expenses for management where no coupons are paid and the principal is not guaranteed. ETN reflect also the credit risk of the underlying asset, i.e. although there is no change in the underlying asset value, the increase in the credit risk can result into change in the ETN price.
ETC are just like the ETFs with the only difference that they reflect the movement of underlying assets as currency or commodity.
First Investment Bank offers:
- purchase and sale of stocks and shares of CIS traded on the regulated market (Bulgarian Stock Exchange JSC;
- purchase and sale of stocks and shares of CIS traded on the OTC market;
- purchase and sale of stocks and shares of CIS traded on foreign markets (regulated and OTC market);
- depository services.
Documents:
- Brokerage contract for financial instruments transactions;
- Financial instrument transaction order;
- Customer categorization document;
- Notification of appropriate service;
- Other documents (you may receive them at the Bank);
- General Terms applicable to contracts with clients of First Investment Bank AD for investment services and activities with financial instruments.
Fees and commissions according to the current Tariff of the Bank are applied.
Signing contracts, giving instructions, orders or requests, and any other legal actions for and on behalf of the client by proxy are allowed only if a notarized power of attorney is presented containing representative powers for carrying out management and/or disposal actions with financial instruments, and a declaration by the proxy that he does not carry out by occupation business transactions with financial instruments.
First Investment Bank AD in pursuance of Art. 10 of the Ordinance on the requirements related to the activities of investment intermediaries and with the objective so the customers, respectively the potential customers can make information-based investment decision, provides a description of the nature and characteristics of the offered and traded by the Bank as an investment intermediary financial instruments and the risks associated with them.
It should be taken into consideration that investment in financial instruments can bring additional risks to investors from unexpected changes in economic and market environment and the investor to take financial and other additional obligations as a result of transactions with financial instruments, including unexpected liabilities, additional to the cost of acquisition of the specific financial instruments.
Investing in financial instruments also bears the risk of losing the entire investment.
Risks related to transactions with shares of collective investment schemes
Investing in the CIS mainly brings to the investor market risk, liquidity risk, issuer risk and settlement risk.
Market risk for investments in CIS is characterized by the probability of a decrease in the price of securities due to market factors or the so called systemic risk.
Liquidity risk for investments in CIS is the risk that the investor can not sell the desired amount of securities.
Issuer risk for investments in CIS is possible in the event of financial difficulty of the issuer or the so called unsystematic (specific) risk.
Settlement risk can occur in the event of failure or delay of the process between the timing of contracting the transaction and the timing of its completion and adverse market effects occurred during this period. It is believed that for transactions executed on the principle “delivery versus payment” (DVP) the risk is lower.
Risks related to transactions on foreign markets
Investments in CIS traded on foreign regulated markets are characterized by the same risks as those on the Bulgarian capital market but a currency risk also exists.
Currency risk is the possibility of adverse movement in the exchange rate between the currency in which the foreign stocks are traded and the local currency.