Instruction No. 062/CREPMF/2020 on the Segregation of Client Funds and the Credit Balance Standard for Management and Intermediation Companies (SGI) on the UMOA Regional Financial Market

Union Monétaire Ouest Africaine (West African Monetary Union)

crepmf / Conseil Régional de l'Epargne Publique et des Marchés Financiers (Regional Council for Public Savings and Financial Markets)

INSTRUCTION N° 062 /CREPMF/ 2020

RELATIVE AU CANTONNEMENT DES FONDS ET A LA NORME DES SOLDES CRÉDITEURS DES COMPTES DE LA CLIENTÈLE DES SOCIÉTÉS DE GESTION ET D'INTERMÉDIATION (SGI) SUR LE MARCHÉ FINANCIER RÉGIONAL DE L'UMOA

The Regional Council for Public Savings and Financial Markets,

Having regard to the Convention of 3 July 1996 establishing the Regional Council for Public Savings and Financial Markets (hereinafter "Regional Council" or "CREPMF") and its Annex on the Composition, Organization, Operation, and Functions of the Regional Council for Public Savings and Financial Markets;

Having regard to General Regulation No. 001/97 of 28 November 1997 on the Organization, Operation, and Supervision of the regional financial market, particularly Articles 23, 37, 47, 48, 82, 140, 141, 142, 143, and 146;

Having regard to Regulation No. 9/2006/CM/UEMOA of 29 June 2006 adopting Specific Accounting Rules applicable to approved participants in the regional financial market;

Having regard to Decision No. CM/DAC/04/04/2017 of 14 April 2017 by the UMOA Council of Ministers appointing the President of the Regional Council;

Having regard to the deliberations of the Regional Council at its 37th extraordinary session on 17 December 2019;

HEREBY ADOPTS:

Avenue Joseph ANOMA 01 B. P.: 1878 Abidjan 01/Côte d'Ivoire presidence@crepmf.org TEL.: (225) 20215742/20215179 Fax: 20221657 www.crepmf.org

---

Instruction n° 062 /CREPMF/2020

TITLE 1: SEGREGATION STANDARD FOR SGI CLIENT FUNDS

Article 1: Definitions For the purposes of this Instruction, the following terms shall apply:

a) Segregation (Cantonnement): The action of opening one or more accounts at a bank or another entity approved by the CREPMF, reserved for the client funds of Management and Intermediation Companies (SGI) and identified separately from any account used to hold funds belonging to the SGI, and of placing client funds therein. b) Clientele: A term designating a group of clients used in the context of financial intermediary activity. The clientele may consist of individuals or professionals. A client is defined as a person receiving a financial service in exchange for a monetary payment. c) Segregated account: An account opened in the books of a bank or any other entity approved by the CREPMF, in the name of an SGI's clientele, intended to receive client funds and make payments on their behalf. It ensures a clear and distinct separation between client funds and SGI-owned funds. d) Audit trail: A set of permanent internal procedures enabling the reconstruction of operations in chronological order, justifying any information with an original document from which it must be possible to trace, through an uninterrupted path, to the summary statement and vice versa, and explaining the evolution of balances from one accounting statement to another, thanks to the retention of movements affecting accounting items.

Article 2: Objective The present Instruction aims to protect the interests of SGI clientele through the segregation of collected third-party funds, by opening and maintaining segregated accounts in the books of a credit institution referred to in Article 4. This operational separation of funds belonging to SGI clientele serves the identification and protection of third-party assets. The SGI must not use its client funds for purposes other than those for which they were entrusted to it.

Article 3: Scope of Application The present Instruction applies to Management and Intermediation Companies (SGI) approved on the Regional Financial Market.

Avenue Joseph ANOMA 01 B. P.: 1878 Abidjan 01/Côte d'Ivoire presidence@crepmf.org TEL.: (225) 20215742/20215179 Fax: 20221657 www.crepmf.org 2/6

---

Instruction n° 062 /CREPMF/2020

Article 4: Obligation to Segregate SGI Client Funds SGIs holding client funds must open one or more distinct and segregated current accounts to receive these funds. They must open the segregated accounts in the books of:

• a bank within the UMOA;
• any other entity approved by the CREPMF for holding client funds.

These accounts are designated as "SGI trust accounts" or "accounts for SGI clientele".

SGIs are required to distinguish between the segregated client accounts subject to a management mandate and other segregated client accounts.

Article 5: Operation of Segregated Accounts Upon receipt of client funds, SGIs must ensure that they are, on the one hand, deposited into the segregated account and, on the other hand, allocated in their books to the client's account for which they were received.

SGIs must, for any sum deposited into the segregated account, implement all due diligence required by prevailing regulations on combating money laundering and terrorist financing. They must inquire with the client, and/or by any other means, regarding the origin and destination of the funds, as well as the purpose of the transaction and the identity of the economic actors involved in generating these funds.

For segregated client accounts, SGIs disburse funds according to the client's instructions or to settle financial transactions concluded by the latter.

Segregated client accounts under a management mandate are managed in accordance with the management mandates concluded with their clients and prevailing regulatory provisions.

Segregated accounts may not:

• be part of a physical or notionally netted account merger agreement;
• carry a debit balance.

These rules do not apply to SGI client funds that are placed directly by the client on a bank account opened and held in their own name.

Article 6: Treatment of Interest Generated by Client Funds Held in Segregated Accounts The SGI may segregate client funds into current trust accounts opened with a bank that remunerates the balance.

Avenue Joseph ANOMA 01 B. P.: 1878 Abidjan 01/Côte d'Ivoire presidence@crepmf.org TEL.: (225) 20215742/20215179 Fax: 20221657 www.crepmf.org 3/6

---

Instruction n° 062 /CREPMF/2020

In cases where segregated funds belong to managed clientele, the SGI is required to distribute generated interest to managed clients proportionally to their assets that contributed to generating said interest.

Article 7: Prohibition on Using Client Funds for Set-off and/or Proprietary Trading SGIs are prohibited from using the credit balances of a given client to settle transactions, fees, and other debts owed by another SGI client. Similarly, SGIs are prohibited from using their client funds for proprietary trading and placements, settling their own debts, or paying other amounts due by them.

Article 8: Client Account Provisioning Ratio The ratio between the credit balance of client accounts and the provision to cover any operation to be performed must always be equal to or greater than 1.

TITLE 2: CREDIT BALANCE STANDARD FOR CLIENT ACCOUNTS

Article 9: Availability and Maturity of Funds Each client maintains a minimum credit balance in the cash account without activity at a level corresponding to account maintenance fees over a one (01) year period.

Once a client's cash account has recorded no movements (deposit, transfer, investment activity, withdrawal or divestment, value-related event) for two (02) years, such that its balance reaches the required minimum, the SGI ceases to deduct commissions (including the valuation commission due to the Central Depository/Settlement Bank (DC/BR) and the conservation fee on assets due to the CREPMF) and other charges from this account, except for reasonable fees for sending, at least once a year, a statement of account.

When the account records movements again, the SGI resumes collecting related fees and commissions from the resumption of activity without retroactive collection, except for the collection of account maintenance fees for the two (02) year period that are due and unpaid.

Article 10: Determination of Client Credit Balances Client credit balances consist of the three (03) elements determined below:

Avenue Joseph ANOMA 01 B. P.: 1878 Abidjan 01/Côte d'Ivoire presidence@crepmf.org TEL.: (225) 20215742/20215179 Fax: 20221657 www.crepmf.org 4/6

---

Instruction n° 062 /CREPMF/2020

A. Gross Amount Sums recorded on the liability side of the balance sheet in the name of the clientele.

B. Elements to Add (+) Cheques and values to be collected received from the clientele as soon as they are available; (+) Amount of sales transactions on behalf of clients, pending settlement (amounts credited to sellers' accounts at the date of transaction, whose corresponding funds will only be collected on the settlement date, i.e., T + 3); (+) Sums due to clients, not yet credited (amounts received by the SGI pending allocation to a client account). The SGI credits client accounts with dividends and interest from securities in conservation at the latest two (2) days after payment by the Central Depository/Settlement Bank (DC/BR); (+) The provision to cover account maintenance fees over a two (2) year period.

C. Elements to Deduct (-) Amount of purchase transactions on behalf of clients, pending settlement (amounts debited to buyers' accounts at the date of transaction, whose corresponding funds are held by brokerage companies until the settlement date); (-) Sums blocked as a provision in the case of a subscription or purchase transaction; (-) Commissions and other fees allocated to the account not yet debited.

TITLE 3: TRANSITIONAL AND FINAL PROVISIONS

Article 11: Transitional Provisions SGIs approved before the effective date of this Instruction have a maximum period of six (06) months from its signature date to comply with its provisions. Beyond this date, proof of compliance with the obligations of this Instruction must be available at any time.

Avenue Joseph ANOMA 01 B. P.: 1878 Abidjan 01/Côte d'Ivoire presidence@crepmf.org TEL.: (225) 20215742/20215179 Fax: 20221657 www.crepmf.org 5/6

---

Instruction n° 062 /CREPMF/2020

Article 12: Publication and Entry into Force This Instruction, which shall be published as required, repeals all prior and contrary provisions.

It enters into force from its signature date.

Signed in Abidjan, on 20 MAR. 2020

For the Regional Council, The President

Mamadou NDIAYE

Avenue Joseph ANOMA 01 B. P.: 1878 Abidjan 01/Côte d'Ivoire presidence@crepmf.org TEL.: (225) 20215742/20215179 Fax: 20221657 www.crepmf.org 6/6