2010-01-01
The General Authority for Financial Supervision issued Decision No. 68 of 2010 to establish licensing guidelines and operational requirements for brokerage company branches and online trading activities on the Egyptian Exchange. The regulation classifies branches into Category One and Two execution branches and marketing branches, mandating specific capital increases, internal control systems, qualified personnel, and strict prohibitions on cash handling and unauthorized agent marketing. It further requires online trading firms to implement authorized electronic signature verification, monitor for price manipulation, and mandates all affected companies to regularize their operations by December 31, 2010.
Chairman of the Board of Directors of the General Authority for Financial Supervision No. (68) for the year 2010 Dated 17/5/2010
Licensing Guidelines for Branches of Brokerage Companies and Licensing for Marketing Trading on the Egyptian Exchange via the Internet Network
Having reviewed the Capital Market Law issued by Law No. 95 of 1992 and its executive regulations, and Law No. 10 of 2009 regarding the regulation of supervision over markets and non-banking financial instruments, and Decision No. 42 of 2006 of the Board of Directors of the General Authority for the Capital Market regarding Exchange membership rules and its amendments, and Decision No. 49 of 2006 of the Chairman of the General Authority for the Capital Market regarding requirements for establishing securities brokerage companies and licensing them to conduct business, and Decision No. 50 of 2006 of the Chairman of the General Authority for the Capital Market regarding the system for trading securities via the Internet network, and Decision No. 24 of 2007 of the Chairman of the General Authority for the Capital Market regarding licensing guidelines for employees in securities brokerage companies, and Decision No. 82 of 2007 of the Board of Directors of the General Authority for the Capital Market and Decision No. 83 of 2008 of the Board of Directors of the General Authority for the Capital Market regarding conditions for registration in the Authority's branch register, and Decision No. 22 of 2009 of the Board of Directors of the General Authority for the Capital Market regarding guidelines for transferring and closing branches of securities brokerage companies.
Approval by the Board of Directors of the General Authority for Financial Supervision in its session held on 17/5/2010
Securities brokerage companies shall not conduct licensed activities regarding marketing, order receipt, or execution through offices or other locations other than the company's headquarters, except after obtaining prior approval from the Authority, based on a company request demonstrating board approval and compliance with the conditions stipulated in this Decision.
Brokerage companies are prohibited from dealing with agents to market their services in any form.
A special register shall be established by the Authority to record approved branches, each assigned a serial number linked to the brokerage company's license number.
The Authority shall issue its decision to approve or reject branch licensing, considering market needs, geographical distribution of the activity, and the applicant's capacity to address and manage risks associated with expansion.
Licensed branches shall be classified as follows:
This branch shall possess all authorities of the headquarters regarding the ability to receive and execute orders, either directly through the order entry and execution system via the Automated Order Matching System (TWS) or through the Automated Order Management System (OMS).
This branch shall have the authority to receive and execute orders exclusively through the Automated Order Management System (OMS), with execution to be carried out by at least one licensed trade executor holding at least a (C) category, according to the executor categories outlined in the Egyptian Exchange membership rules.
The activity of this branch shall be limited to marketing brokerage services, attracting clients to brokerage companies, introducing them to trading systems, company policies, and generally regulating capital market legislation, and familiarizing them with trading systems.
The brokerage company shall establish an internal control system covering the headquarters and all licensed branches to ensure the sound conduct of activities and protection of client rights, and must specifically verify the following:
Registration in the branch register requires meeting the following general conditions:
a. One year from the date of expiration of the business suspension imposed on the company based on a decision by the Chairman of the Board of Directors of the Authority under Article 30 of the Capital Market Law.
b. Nine months from the date of expiration of the prohibition on conducting business imposed on the company based on a decision by the Board of Directors of the Authority under Article 31 of the Capital Market Law.
c. Six months from the date the company recovers the additional insurance amount imposed on it based on a decision by the Board of Directors of the Authority under Article 31 of the Capital Market Law.
d. Three months from the date any of the other measures stipulated in Article 31 of the Capital Market Law take effect.
Approval for registering Category One execution branches requires the company to prove that the requested branch meets all requirements for conducting securities brokerage activities, specifically:
Presence of a branch manager and branch internal auditor, in addition to at least one trade executor of Category (B), and two executors of Category (C), according to the executor categories in the Exchange membership rules issued by Decision No. (42) of 2006 of the Chairman of the General Authority for the Capital Market and its amendments, a client account manager, and customer service representatives as per the aforementioned decision.
Implementation of a telephone order recording system and actual application of the automated order book.
Availability of an internal control system ensuring protection of client rights at the branch.
Commitment and undertaking that the branch shall not receive or disburse cash or checks to/from clients, and that client cash transactions shall be conducted through the headquarters or Category One execution branches.
Provision of an automated system to verify received orders and deliver original orders or proof of receipt via any method to the headquarters at least weekly.
Provision of what allows order entry through the Automated Order Management System linked to the company's headquarters, and undertaking not to enter orders or execute operations at the Exchange except through authorized persons.
Brokerage companies conducting online trading activities shall comply with activating all provisions of Decision No. (50) of 2006 of the Chairman of the General Authority for the Capital Market, specifically verifying:
Registration for Category Two execution branches requires the company to prove that the requested branch meets all requirements for conducting securities brokerage activities, specifically:
Presence of a branch manager and branch internal auditor, in addition to at least one trade executor of Category (B), and two executors of Category (C), according to the executor categories in the Exchange membership rules issued by Decision No. (42) of 2006 of the Chairman of the General Authority for the Capital Market and its amendments, a client account manager, and customer service representatives as per the aforementioned decision.
Implementation of a telephone order recording system and actual application of the automated order book.
Availability of an internal control system ensuring protection of client rights at the branch.
Commitment and undertaking that the branch shall not receive or disburse cash or checks to/from clients, and that client cash transactions shall be conducted through the headquarters or Category One execution branches.
Provision of an automated system to verify received orders and deliver original orders or proof of receipt via any method to the headquarters at least weekly.
Provision of what allows order entry through the Automated Order Management System linked to the company's headquarters, and undertaking not to enter orders or execute operations at the Exchange except through authorized persons.
This Decision shall be published on the Authority's and Exchange's websites and in the Egyptian Gazette, and shall take effect from the day following its publication on the Authority's website.
Brokerage companies shall notify the Authority of a list of all their branches and affiliated locations where any of their activities are conducted, as well as a list of names and details of their trade executors, license numbers and dates, and a list of candidates applying for trade executor licenses specifying the required execution category, all within two weeks from the effective date of this Decision.
All companies shall regularize their status in accordance with the provisions of this Decision within a maximum period of December 31, 2010, from its effective date.
Authority departments shall continue to license branches for companies whose applications were completed prior to the effective date of this Decision, provided they commit to regularizing their status within the period specified in the preceding paragraph.
All provisions or decisions conflicting with the provisions of this Decision are hereby repealed.
Chairman of the Board of Directors
Dr. Ziad Bahaa El-Din