2017-01-01
The Egyptian Financial Supervisory Authority (EFSA) issued Decision No. (84) of 2017 to amend Articles Three and Five of its previous Decision No. (61) of 2017 regarding the protection of client accounts at securities companies. The amended Article Three mandates that resident clients must open accounts and execute transactions directly, prohibiting general powers of attorney for account opening or margin and same-day trading unless fully paid, while permitting foreign and expatriate clients to authorize representatives with authenticated documents. The revised Article Five standardizes dividend and return distribution to direct bank transfers, specific checks, or dedicated cards, and explicitly permits custodians and margin brokers to offset client dividends against margin debts or custody fees, subject to explicit contractual clauses and mandatory declarations to the Central Depository and Clearing Company.
Dated 6/6/2017
Board of Directors of the Egyptian Financial Supervisory Authority
After reviewing the Capital Market Law issued by Law No. (95) of 1992 and its Executive Regulations and the decisions issued in implementation thereof;
And the Central Depository and Clearing of Securities Law issued by Law No. (93) of 2000 and its Executive Regulations;
And the Law Regulating Supervision over Non-Banking Financial Markets and Instruments issued by Law No. (10) of 2009;
And Law No. (119) of 1952 Regarding Guardianship over Property Provisions;
And Law No. (1) of 2000 Issuing the Law Regulating Certain Conditions and Litigation Procedures in Personal Status Matters;
And Presidential Decision No. (191) of 2009 Regarding the Provisions Organizing the Management of the Egyptian Exchange and Its Financial Affairs;
And Presidential Decision No. (192) of 2009 Issuing the Statute of the Egyptian Financial Supervisory Authority;
And Board of Directors Decision of the Authority No. (67) of 2012 Regarding the Mechanism for Trading Shares in the Same Session and Its Amendments;
And Board of Directors Decision of the Authority No. (67) of 2014 Regarding the Regulation of Margin Purchase of Securities;
And Board of Directors Decision of the Authority No. (61) of 2017 Regarding Procedures to Enhance the Protection of Accounts of Dealing Parties with Securities Companies;
And the approval of the Board of Directors of the Authority in its session held on 6/6/2017.
The following texts are substituted for the texts of Articles Three and Five of the aforementioned Board of Directors Decision of the Authority No. (61) of 2017:
All securities exchange companies, securities portfolio formation and management companies, or licensed custodian companies and entities shall be obligated to refrain from concluding any transactions or opening accounts for their resident clients except directly through the client. Issuing powers of attorney to any person, regardless of their legal form, for opening client accounts shall not be considered valid, except for foreign natural persons and Egyptians abroad, who may authorize others to open their accounts with the aforementioned companies, provided that the client's address is abroad and the power of attorney is authenticated by the competent Egyptian authorities abroad.
Subject to the provision of the preceding paragraph, the execution of securities buy and sell transactions, deposit and withdrawal of checks and deposits, and the execution of dispositions and data, and account statement certification, may be carried out via a specific official power of attorney or a general power of attorney, provided that the power of attorney includes a statement authorizing dealing with the client's account at companies operating in the securities sector.
In all cases, the execution of margin securities purchase transactions or trading in the same session through a power of attorney shall not be permitted, unless the purchase of securities traded in the same session is fully paid.
The companies referred to in the first paragraph of this Article shall be obligated to refrain from concluding any transactions, opening accounts, or trading in securities traded in the same session through legal entities, except through the person legally authorized to execute legal dispositions on behalf of the legal entity or through anyone duly authorized to do so.
Dividends or returns decided by companies or entities to be distributed to their shareholders or security holders shall be paid out through the client's cash disposition at central distribution outlets and the Central Depository and Clearing at banks, or according to the method specified by the client through one of the following methods:
Notwithstanding the foregoing, dividends or returns referred to may be paid to the account of companies and entities licensed for margin purchase, provided the following conditions are met:
a. The dividends or returns arise from securities purchased for their clients' accounts on a margin basis or pledged as collateral for this return.
b. The contract concluded between the licensed margin purchase companies/entities and the client explicitly includes a clause granting the company or entity the right to pay these dividends and returns for the securities to offset the debt owed by the client according to the margin purchase system.
The Central Depository and Clearing Company may request the company or entity applying to pay dividends or returns for securities owned by its clients to its account, in accordance with the preceding paragraph, to submit a signed declaration from the company or entity stating the quantity of securities purchased or pledged according to the margin purchase system for which dividends or returns are requested to be paid for each of its clients, and that these dividends and returns for the securities are to offset the debt owed to it according to the margin purchase system.
Furthermore, dividends or returns referred to may be paid to the client's account, provided the contract concluded between the client and the custodian explicitly includes a clause granting the custodian the right to pay dividends or returns for securities owned by the client, with the obligation to pay them to the client upon request or deposit them into their account at a bank on the next working day at the latest from the payment date.
The Central Depository and Clearing Company may request the custodian applying to pay dividends or returns for securities owned by its clients, in accordance with the preceding paragraph, to submit a signed declaration stating that the securities custody contract with the custodian for which dividends or returns are requested to be paid – or any annex thereto – includes a clause granting the custodian the right to pay these dividends or returns.
This Decision shall be published in the Egyptian Official Gazette and on the websites of the Authority, the Egyptian Exchange, and the Central Depository and Clearing Company, and shall take effect from the date of its publication in the Egyptian Official Gazette.
Egyptian Financial Supervisory Authority
Egyptian Financial Supervisory Authority
Chairman of the Board
Saif Sami
46076
Egyptian Financial Supervisory Authority
Egyptian Financial Supervisory Authority
Chairman of the Board
Saif Sami
46076