Decision No. 40 of 2021 Regarding the Ownership Structure, Board Formation, and Nomination Conditions for the Central Depository and Clearing Company

Financial Regulatory Authority Head of the Authority

Decision No. (40) of 2021 dated 2021/3/21 Regarding the ownership structure regulations of the Central Depository and Clearing Company for Government Securities and Financial Instruments, the regulations for forming the company’s board of directors, and the conditions and procedures for nominating candidates for the chairmanship and membership of the company’s board of directors.

The Board of Directors of the Financial Regulatory Authority, Having reviewed:

• Law No. (159) of 1981 on Joint Stock Companies, Commandite Societies by Shares, Limited Liability Companies, and Single-Person Companies;
• Law No. (93) of 2000 on the Central Depository and Clearing Company for Securities and Financial Instruments;
• Law No. (10) of 2009 regulating supervision over non-banking financial markets and instruments;
• Law No. (194) of 2020 on the Central Bank and Banking System;
• Prime Minister’s Decision No. (2589) of 2020 regarding licensing the Ministry of Finance, jointly with the Central Bank of Egypt, to establish a joint stock company for the purpose of central depository and clearing of government securities and financial instruments;
• Board Decision No. (95) of 2017 regarding the measures taken by the Authority in case of violations by securities central depository and clearing companies, and the rules for applying these measures;
• Board Decision No. (126) of 2020 regarding the ownership structure regulations for companies conducting central depository and clearing activities for government securities and financial instruments, and the regulations for forming boards of directors of such companies; And after approval by the Board of Directors in its session held on 2021/3/21;

Has Decided (Article One) The Central Bank of Egypt shall own 100% of the shares in the company conducting central depository and clearing activities for government securities and financial instruments, if established by the Bank alone.

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The Central Bank may also establish the company in partnership with one or more public law entities and/or one or more financial institutions, provided that the Central Bank owns more than 50% of the company’s capital.

(Article Two) The Central Depository and Clearing Company for Government Securities and Financial Instruments shall comply with the following regulations when forming its board of directors:

1. The number of board members shall not be less than five and not exceed nine, with the majority being experienced non-executives.
2. The term of office for the company’s board of directors shall be three years.
3. The chairman and executive members of the company’s board may not serve for more than three consecutive or non-consecutive terms.
4. The positions of chairman and managing director/chief executive officer shall not be held by the same person, subject to the application of Clause (1-1-3) of Board Decision No. (100) of 2020 regarding corporate governance rules for companies operating in non-banking financial activities.
5. A board member shall not simultaneously hold a position on the board of another company conducting central depository and clearing activities.
6. The company shall use cumulative voting when electing board members.
7. The board’s composition must include at least one female member.

The following conditions shall apply to candidates for the chairmanship or membership of the company’s board:

1. Possession of a suitable higher education qualification.
2. For the chairman or managing director, professional experience in banking or non-banking finance shall be at least ten years, and they must have previously held a supervisory position of an appropriate level in a banking or non-banking institution.

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3. For the majority of board members, professional experience in banking or non-banking finance shall be at least seven years.
4. For at least two board members, professional experience in legal, accounting, financial, or technical fields related to the company’s activities shall be at least seven years.
5. Possession of professional competence, suitability, and necessary leadership qualities for board members.
6. Good reputation and conduct, with no prior final conviction for a felony or misdemeanor involving moral turpitude or trust, or any of the serious crimes (1) stipulated in laws regulating non-banking financial activities, the Central Bank and Banking System Law, or the Anti-Money Laundering Law, or a declaration of bankruptcy within the preceding five years (unless reputation has been restored).
7. The Authority must not have issued more than one measure against the company during his tenure as a board member (excluding warnings), due to his failure to fulfill his duties or responsibilities, and he shall be barred from board membership for the two subsequent terms following the issuance of such measures. In all cases, the company shall take legally prescribed procedures to exclude a board member if any of the conditions in the preceding clauses are met.

(Article Three) Applications for nomination to the chairmanship and membership of the board shall be submitted to the company, accompanied by supporting documents demonstrating compliance with the required conditions as outlined in this decision.

(Article Four) A committee formed by the Head of the Authority shall examine and review nomination applications for the chairmanship and board membership. The committee shall verify candidates’ names, ensure compliance with required conditions, and request the company to submit supporting documents for the candidates in accordance with the prescribed standards.

(1) Serious crimes, as applied under this decision, refer to crimes punishable by imprisonment or a fine with a maximum penalty of no less than five hundred thousand Egyptian pounds, under laws regulating non-banking financial activities, the Central Bank and Banking System Law, or the Anti-Money Laundering Law.

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(Article Five) The committee shall convene upon invitation by its chairman, with at least a majority of its members present. The committee shall issue its recommendations by a majority of attending members, and prepare a reasoned report detailing the final position, including proposed results and recommendations, verification of compliance for each candidate, and reasons for excluding non-compliant candidates. The report shall be submitted to the Head of the Authority for approval prior to being presented to the Board of Directors for ratification.

(Article Six) Interested parties may appeal the Board’s decision approving candidate names within five working days from notification or knowledge of the decision, before the Authority’s Appeals Committee, in accordance with Article (53) of the Central Depository and Clearing Company for Securities and Financial Instruments Law. The Appeals Committee shall rule on the appeal within a period not exceeding two weeks from the expiration of the appeal period. Its decision shall be final and enforceable, with interested parties notified within one working day at most from its issuance.

(Article Seven) Board Decision No. (95) of 2017 regarding measures taken by the Authority in case of violations by securities central depository and clearing companies, and the rules for applying these measures, shall apply to the Central Depository and Clearing Company for Government Securities and Financial Instruments.

(Article Eight) This decision shall be published in the Egyptian Gazette and on the Authority’s electronic website, and shall take effect from the day following its publication in the Egyptian Gazette. Any provision contrary to its provisions is hereby repealed.

Chairman of the Board of Directors Dr. Mohamed Omran

Al Qarya Al Smarta, Building 116, Giza, Egypt Postal Code: 110 Tel: +202 35345350 Fax: +202 35370036 WWW.FRA.EG.GOV