Decision of the Board of Directors of the Egyptian Financial Regulatory Authority

No. (9) dated 27/2/2013

Regarding guidelines for dealing by securities brokerage firms and portfolio management companies with foreign deposit certificates corresponding to securities listed on the Egyptian Exchange

The Board of Directors of the Egyptian Financial Regulatory Authority,

Having reviewed the Capital Market Law issued under Law No. (95) of 1992 and its Executive Regulations; And the Central Depository and Clearing Law for Securities issued under Law No. (93) of 2000 and its Executive Regulations; And the President of the Republic's Decision No. (191) of 2009 regarding the rules governing the management and financial affairs of the Egyptian Exchange; And the President of the Republic's Decision No. (192) of 2009 issuing the Basic Statute of the Egyptian Financial Regulatory Authority; And upon approval by the Board of Directors in its session held on 27/2/2013.

Decided

(Article One)

The attached guidelines regarding the dealing by securities brokerage firms and portfolio management companies with foreign deposit certificates corresponding to securities listed on the Egyptian Exchange shall apply, and the regulations governing the trading of securities shall apply.

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Capital Market Law issued under Law No. (95) of 1992 and its Executive Regulations, insofar as no specific provision is stated in these guidelines.

(Article Two)

Securities brokerage firms are obligated to obtain the Authority's approval to deal with foreign deposit certificates corresponding to securities listed on the Egyptian Exchange, prior to executing any transaction on behalf of any of their clients.

(Article Three)

Portfolio management companies are prohibited from dealing with foreign deposit certificates corresponding to securities listed on the Egyptian Exchange for their own account or on behalf of their clients, except through one of the brokerage firms that has obtained the Authority's approval.

(Article Four)

The Authority may suspend a company's dealing with foreign deposit certificates corresponding to securities listed on the Egyptian Exchange in cases deemed necessary to preserve transaction stability and prevent harm to the market or its participants.

(Article Five)

This Decision shall be published in the Egyptian Gazette and on the websites of the Authority and the Egyptian Exchange, and shall take effect from the day following its publication in the Egyptian Gazette.

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Chairman of the Board of Directors
Dr. Ashraf El-Sharkawy

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Guidelines for Dealing with Foreign Deposit Certificates Corresponding to Securities Listed on the Egyptian Exchange

First: Guidelines for Egyptian Securities Brokerage Firms to Obtain the Authority's Approval to Deal with Foreign Deposit

Certificates

(1) Article

Securities brokerage firms are obligated to apply to the Authority to obtain its approval to conduct the activity of trading foreign deposit certificates corresponding to securities listed on the Egyptian Exchange. Any company that has not obtained the Authority's approval is prohibited from conducting any brokerage transactions related to the aforementioned activity, either directly or through another brokerage firm that holds the approval.

(2) Article

A securities brokerage firm licensed by the Authority and wishing to obtain approval to conduct this activity must submit an application to the Authority, adhering to the following:

1. Provide documentation confirming that the company is licensed to perform all services related to dealing with securities, which requires that the value of issued and paid-up capital exceeds 20 million Egyptian pounds.
2. Ensure that the company's average financial solvency ratio over the 6 months preceding the application date is less than 10% of its liabilities.
3. Increase the insurance coverage imposed on the company to match the risks of the activity, with the Authority determining the increase amount based on the volume of transactions conducted by the company.
4. Provide documentation confirming that no administrative penalties have been issued by the Securities Exchange or the Authority during the 6 months preceding the application.
5. Maintain complete separation between the company's activities provided to its clients within the Egyptian Exchange and the activity of dealing with foreign deposit certificates.
6. Establish a specialized department for trading foreign deposit certificates, staffed by no fewer than (7) specialized employees for this activity, who shall not hold any other position within the company. The department's experience must be at least three years in trading foreign securities and foreign deposit certificates. For other staff in the department, a minimum of one year of experience is required. Documentation must confirm that employees hold a university degree from a specialized or other relevant faculty, a professional certification in their field, practical experience, proficiency in English, and any other certificates for department staff, numbered in the application (passing tests).
7. Provide documentation confirming the existence of an internal system within the company that allows for the application of the Authority's guidelines and the Central Bank's Anti-Money Laundering Unit regarding anti-money laundering and counter-terrorist financing guidelines.
8. Maintain records specified by the Authority, including: a penalty register, a client data register, an order register, and a transaction register.
9. Submit to the Authority templates for the following contracts and documents: a. A contract template with the client.
   b. A contract template with the custodian.
   c. A contract template with a foreign brokerage firm upon contracting.
   d. A risk disclosure statement template for participants in the activity.

(3) Article

The Authority's approval shall be issued within 60 days from the date of submitting a complete application. The company shall receive an attachment to its license specifying the type and date of approval. A copy of the approval shall also be notified to the Egyptian Exchange and the Egyptian Depository, Clearing and Central Registry Company. In case of rejection, the decision shall be reasoned and the applicant company shall be notified within 15 days. The company shall have the right to appeal in accordance with the provisions of the Capital Market Law issued under Law No. 95 of 1992 and its Executive Regulations.

Second: Guidelines for the Activity of Dealing with Foreign Deposit Certificates for Securities Listed on the Egyptian Exchange

Egyptian

(4) Article

A company that has obtained the Authority's approval must adhere to the following guidelines when conducting the activity of trading foreign deposit certificates corresponding to securities listed on the Egyptian Exchange:

1. Contracts with clients shall be executed using the contract template previously submitted to the Authority after obtaining the Authority's approval.

(5) Article

2. The client shall be provided with the attached risk disclosure statement after brokerage and shall sign it.
3. Dealing shall be conducted through a foreign securities broker licensed by the relevant regulatory authority.
4. The company shall notify the foreign broker of orders via telefax according to the priority of receipt and record them in the order register according to the priority of receipt.
5. The use of margin buying systems, borrowing securities for the purpose of selling, or any other systems for which rules have not been issued for application by the competent authority in Egypt is prohibited.
6. Cash settlement for financial transactions conducted on deposit certificates shall be completed in accordance with the rules and guidelines issued by the Central Bank regarding dealing with foreign currency and transfers abroad, and through one of the banks subject to Central Bank supervision.
7. Invoices issued by the foreign broker upon execution of each transaction shall be retained. Invoices for the client shall be issued based on the invoices issued by the foreign brokerage company after adding the commission due to the company. The company must record these transactions in its transaction registers.
8. A monthly settlement statement shall be provided to the client before the 10th day of the following month.
9. Statements of account shall be sent to clients every 3 months, covering all transactions conducted during the period. If no objection is raised within 15 days from the date of receipt, this shall be considered the client's implicit approval.

Third: Data and Reports on Transactions with Foreign Deposit Certificates:

(6) Article

Every brokerage company is obligated to submit the following data and reports to the Egyptian Exchange, in addition to any other reports requested by the Exchange. The Egyptian Exchange shall provide these reports to the Authority periodically and before the 10th day of the following month for each period:

1. A monthly statement of the number of deposit certificates issued and the issuance amount, including the percentage of the foreign investor's share in the company during the issuance of deposit certificates.
2. A monthly statement of trading transactions in foreign deposit certificates, which must include at least the names of selling and buying clients, their identification codes, the transaction date, the settlement date, the number of currency deposit certificates, and the total amounts received or paid.

(7) Article

The company's internal auditor is obligated to verify that the company complies with the Egyptian Exchange's approval regarding the reports mentioned in Article (5) of these guidelines, as well as the following steps:

1. Any violations of the guidelines governing dealing with foreign deposit certificates issued against Egyptian securities contained in this Decision.
2. Any modification or change to the basic data and documents submitted to the Authority.
3. Any suspicion related to money laundering and terrorist financing.
4. Any suspicion of manipulation through foreign deposit certificates or violations related to rules and transfers abroad.

Fourth: Guidelines for Portfolio Management Companies

(7) Article

Portfolio management companies are obligated to deal on behalf of their clients with foreign deposit certificates through Egyptian brokerage firms that have obtained the Authority's approval to conduct the activity. They are also obligated to adhere to the guidelines stipulated in items (5) and (8) of Article (2), and items (1), (8), and (9) of Article (4) of this Decision.

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