Decision of the Board of Directors of the Authority

No. (21) of 2010 Regarding the Basic Standards of Professional Performance for Companies Operating in the Field of Evaluation, Classification, and Structuring of Securities

The Board of Directors of the Egyptian Financial Supervisory Authority

Having reviewed the Capital Market Law issued by Law No. 95 of 1992, and its Executive Regulations, Having reviewed the Law Regulating Supervision on Non-Banking Financial Markets and Instruments issued by Law No. 10 of 2009, Having reviewed the Board of Directors Decision No. 72 of 2009, Having reviewed the memorandum presented to the Board of Directors at its session No. 2 of 2010.

Decided:

Article (1):

Companies operating in the securities field and engaged in the activity of evaluation, classification, and structuring of securities are committed, as of this date, to applying the Basic Standards of Professional Performance attached to this Decision, and to notifying the Authority thereof within a period not exceeding six months from the date of issuance of this Decision.

Article (2):

Any company applying for a license to continue the activity of evaluation, classification, and structuring of securities must submit evidence of work including the policies and procedures the company adopts to comply with those standards, without prejudice to any other documents or conditions required to be submitted with the license application.

Article (3):

This Decision shall be effective from the day following its publication on the Authority's website, and the relevant sectors and departments shall implement it according to their respective competencies.

Dr. Ziad Bahaa El-Din Chairman of the Board of Directors of the Authority

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Egyptian Financial Supervisory Authority (EFSA)

Note: The term "Company" refers to companies operating in the field of evaluation, classification, and structuring of securities, and "Analyst" refers to their employees.

Part One

Quality and Credibility Standards in Credit Rating Operations

Chapter One

Quality of the Credit Rating Process

Article (1):

The Company shall establish a written procedural manual detailing the procedures it follows when conducting credit rating operations and shall adhere to those procedures.

The purpose of preparing such a manual is to verify that credit rating operations are conducted based on a thorough analysis of the data requested by the Company from the Issuer, the Guarantor of the Issuer's obligations, or other rating-requesting parties, in accordance with the credit rating methodology followed by international credit rating agencies.

Article (2):

The Company shall follow an organized credit rating methodology referred to as "Methodology", and the Analyst shall adhere to this methodology when evaluating the creditworthiness of the Issuer.

The purpose of this is to ensure that the evaluation and rating approach is not altered after the process has begun in order to artificially improve the rating grade contrary to the actual status of the Issuer or its securities.

Article (3):

The credit rating operation shall be assigned to the Company as an entity, not to any of its individual Analysts, and the procedures and reports of the evaluation processes must reflect all available information and data requested by the Company from the rating-requesting party.

The purpose of this is to ensure that all documents deemed necessary by the Company and obtained from the requesting party are utilized in the evaluation process to verify that the credit rating result accurately reflects the true status of the Issuer and its securities.

Article (4):

The Company shall appoint Analysts who possess sufficient expertise and knowledge in the fields of securities evaluation and analysis, in accordance with the competencies, qualifications, and conditions specified by an Authority Decision.

The reason for this is the importance of the credit rating process, as its results reflect opinions that investors may deem essential for making investment decisions regarding underwriting, buying, or selling.

Article (5):

The Company shall retain records and documents supporting its credit rating and evaluation work for a period of at least five years from the date the Issuer fulfills all its obligations regarding the issuance, without prejudice to the provisions of the Capital Market Law issued by Law No. 95 of 1992 and its Executive Regulations regarding this matter.

The purpose of this is a supervisory objective deemed necessary by the Authority for overseeing the Company's operations and its credit rating and evaluation activities.

Article (6):

The Company shall establish procedures to prevent the issuance of any credit analysis or special report on credit evaluation or rating that contains any misleading or incorrect information regarding the creditworthiness of the Issuer or its securities.

This relates to the Company's obligation to establish an internal control system to prevent its Analysts from conducting evaluation procedures whose results are misleading or incorrect.

Article (7):

The Company shall verify that it has access to correct and sufficient sources, information, and data to issue credit rating reports, and determine whether the number of qualified Analysts for conducting credit rating operations is adequate. In cases where the credit rating relates to a type of financial product or instrument with limited historical data and information, the Company must clearly and prominently indicate in its issued report the limitations of the credit rating issued.

The purpose of this is to emphasize that a high-quality credit rating report must reflect all obligations related to the issuance and the Issuer. It also aims to compel the Company to follow appropriate verification procedures to ensure that the information and data used in the credit rating and evaluation process are sound and support the rating grade issued by the Company.

Article (8):

The Company shall, through its manager and experienced Analysts, conduct a feasibility study before undertaking any credit rating operations for issuances whose structures differ from those commonly known to the Company or for a different type of issuance.

The purpose of this is to ensure that the Company verifies the feasibility of the proposed issuance structure for credit rating and evaluation processes, as well as to verify the availability of technical expertise and Analysts capable of completing the credit rating process for this type of issuance.

Article (9):

The Company shall establish a strict and robust system to monitor the evaluation methods and models generally followed by the Company and significant changes thereto. This shall be done with complete independence from the credit rating and evaluation operations the Company conducts for Issuers, their obligations, and their securities.

The purpose of this is to verify that the credit rating methods and procedures followed by the Company and its Analysts are sound and up-to-date in accordance with evolving evaluation methodologies.

Article (10):

The Company shall ensure the suitability of the methods and models used in determining the credit rating of structured financial instruments for potential fundamental changes to the assets underlying those structured instruments.

The purpose of this is to verify the ability to issue periodic credit rating reports during the life of the issuance in a standard and sound manner according to changes that may occur in the risks of assets underlying those instruments.

Article (11):

The Company shall refrain from accepting a credit rating operation for an issuance whose financing structure is linked to a new type of structured financial instrument for which sufficient data on the underlying assets is not available to affect the Company's ability to determine a reliable credit rating grade.

The objective of this is to support investor confidence in the evaluation and credit rating activity in general.

Article (12):

The Company shall adopt methods aimed at developing the performance of its Analysts and equipping them with the required expertise, as well as ensuring their independence during the credit rating process procedures.

This aims to build expertise in the field of credit rating and to verify that Analysts have a degree of independence to evaluate the Issuer or its securities.

Chapter Two

Follow-up and Updates

Article (13):

The Company shall ensure the availability of Analysts and financial resources necessary to follow up on and update existing credit rating reports. Except for credit rating reports that clearly indicate that no follow-up or continuous update will follow, the following shall be carried out continuously to follow up on and update credit rating reports issued by the Company: (a) Regularly and periodically monitor the creditworthiness of the Issuer. (b) Initiate a review of the existing credit rating status upon receipt of information that may result in a change to the rating grade or status issued by the Company (including rating termination), to be conducted in accordance with the applied rating methodology. (c) Update the rating in a timely manner according to the results of the conducted review, taking into account the Analysts' experience accompanying the issuance from its inception whenever possible. (d) Apply any changes to rating criteria or assumptions to both the initial and subsequent ratings when necessary.

The objective of this is to emphasize the Company's responsibility to issue periodic reports within their prescribed deadlines and disclose them to investors according to the governing rules, preferably having the same Analysts who conducted the initial evaluation prepare the periodic reports to leverage their accumulated experience and information, among other elements, that support the credibility of the credit rating grade issued by the Company.

Article (14):

If the Company assigns the updating of a credit rating report to Analysts other than those who conducted the initial rating at issuance, the Company shall verify the expertise and competence of the new Analysts and provide all necessary resources, data, and information to ensure the continued quality of periodic credit rating reports issued.

The objective of this is to ensure the same level of competence for reports issued by the Company regarding the issuance throughout its life.

Article (15):

The Company shall announce the credit rating result to the public and its subscribers simultaneously, and the announcement must include the date of the previous rating update. Whether there will be future periodic reports or not.

This aims to ensure the simultaneous availability of the credit rating result to the public, and to provide investors with an indicator regarding the periodicity of report issuance and updates.

Chapter Three

Credibility of the Rating Process

Article (16):

The Company and its Analysts are subject to Capital Market Law No. 95 of 1992, its Executive Regulations, and decisions issued pursuant thereto.

Article (17):

The Company and its Analysts shall adhere to honesty and fair treatment towards the Issuer, investors, market participants, and the general public.

Article (18):

The Company shall verify that its Analysts possess high standards of credibility and good reputation, and shall not engage Analysts who have previously been subject to disciplinary sanctions or final convictions for crimes involving moral turpitude or dishonesty, unless their reputation has been restored.

Article (19):

The Company or its Analysts shall not provide any explicit or implicit assurances, guarantees, or indications regarding the credit rating result prior to conducting evaluation operations, except for preparing preliminary ratings and evaluations used in structured financing or similar operations.

The purpose of this is to prevent subsequent rating procedures from being influenced by any preliminary assurances or indications issued by the Company that are not thoroughly considered.

Article (20):

The Company and its Analysts are prohibited from providing any recommendations regarding the structure of the structured financial instruments they are rating or proposals to change it.

This aims to completely distance the Company from the issuance structure and from providing any change recommendations that could affect the credit rating result, as this does not fall within the activity of a credit rating company.

Article (21):

The Company shall appoint an internal auditor whose duty is to ensure compliance by the Company and its Analysts with the Basic Standards of Professional Performance and applicable laws and regulations. Their financial compensation shall not be linked to the reports issued by the Company, its revenues, or its collected fees.

The purpose of this is to ensure the independence of the employee by placing them in a position completely separate from the rating operations conducted by the Company, its activity volume, and its revenues.

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Egyptian Financial Supervisory Authority (EFSA)

Headquarters: Smart Village, Building 15-84 B, Km 28 Cairo-Alexandria Desert Road, 6th of October Governorate, Postal Code: 12577 Telephone: +202 2537 0040, Fax: +202 2537 0041 Email: info@efsa.gov.eg Website: www.efsa.gov.eg