Ordinance No. 96-08 of January 10, 1996, on Collective Investment Schemes in Securities

Ordinance No. 96-08 of 19 Chaâbane 1416 Corresponding to January 10, 1996, regarding collective investment schemes in securities (O.P.C.V.M) (V.I.C.A.V) and (F.C.P). The President of the Republic; Having regard to the Constitution, and in particular its Articles 115 and 117; Having regard to the platform bearing national consensus on the transitional period, in particular its Articles 5, 25 and 26 (Paragraph 5); Having regard to Ordinance No. 66-154 of 18 Safar 1386 corresponding to June 8, 1966, as amended and supplemented, carrying the civil procedure code; Having regard to Ordinance No. 66-156 of June 8, 1966, as amended and supplemented, carrying the penal code; Having regard to Ordinance No. 75-58 of September 26, 1975, as amended and supplemented, carrying the civil code; Having regard to Ordinance No. 75-59 of September 26, 1975, as amended and supplemented, carrying the commercial code; Having regard to Law No. 90-10 of April 14, 1990, as amended and supplemented, relating to currency and credit; Having regard to Law No. 90-22 of August 18, 1990, as amended and supplemented, relating to the commercial register; Having regard to Legislative Decree No. 93-10 of May 23, 1993, as amended and supplemented, relating to the securities exchange; Having regard to Ordinance No. 95-06 of 23 Chaâbane 1415 corresponding to January 25, 1995, relating to competition; Having regard to Ordinance No. 95-22 of 29 Rabie El-Aouel 1416 corresponding to August 26, 1995, relating to the privatization of public enterprises; Having regard to Ordinance No. 95-25 of 30 Rabie Ethani 1416 corresponding to September 25, 1995, relating to the management of the State's commercial capital; After adoption by the National Council of Transition; Promulgates the Ordinance whose text follows:

Article 1. — This Ordinance aims to define the rules for the formation and operation of collective investment schemes in securities (O.P.C.V.M.). These organizations consist of two categories of institutions: — the variable capital investment company (V.I.C.A.V), — the common investment fund (F.C.P).

TITLE I THE VARIABLE CAPITAL INVESTMENT COMPANY (V.I.C.A.V) Chapter I Definition and Purpose Art. 2. — The variable capital investment company denoted hereinafter as V.I.C.A.V, is a joint-stock company whose purpose is the management of a portfolio of securities and negotiable debt instruments. It is governed by the provisions of the commercial code for everything not defined by the provisions of this Ordinance.

Art. 3. — V.I.C.A.V shares are issued and repurchased, at any time, at the request of any subscriber or shareholder, at the net asset value, increased or decreased, as the case may be, by fees and commissions. The Commission for the Organization and Supervision of Stock Exchange Operations (C.O.S.O.B) provided for in Article 31 of Legislative Decree No. 93-10 of May 23, 1993, may, in light of market constraints, determine by regulation, the periodicity of issuance and repurchase of these shares. The methods for calculating the net asset value are detailed by the C.O.S.O.B.

Art. 4. — V.I.C.A.V shares may be admitted to listing on the securities exchange under conditions fixed by the C.O.S.O.B.

Art. 5. — The V.I.C.A.V is subject to the following rules:

1. shares issued by the company do not carry a preferential subscription right for capital increases,
2. share transfers are not subject to shareholder approval clauses,
3. shares must be fully paid up upon subscription,
4. the general meeting is convened within four (4) months of the close of the fiscal year, It may meet without a quorum requirement.
5. distributable sums must be paid no later than six (6) months after the close of the accounting year,
6. capital variations can occur without delay and by right, subject to the articles of association and the provisions of Articles 11 and 12 of this Ordinance.

Chapter II Formation Art. 6. — No V.I.C.A.V may be formed unless its articles of association have been previously approved by the C.O.S.O.B. The conditions for the approval of V.I.C.A.V are determined by a regulation of the C.O.S.O.B. The refusal of approval by the commission must be reasoned. The applicant retains all rights of appeal provided by the legislation in force.

Art. 7. — The V.I.C.A.V is required, at the latest, three (3) months after the approval of its articles of association, to complete the formalities related to the formation of joint-stock companies.

Art. 8. — The initial capital of a V.I.C.A.V must not be less than an amount fixed by executive decree.

Chapter III Operation Art. 9. — The capital amount of the V.I.C.A.V is equal, at all times, to the value of the net assets less the distributable sums. The methods for calculating the net assets of a V.I.C.A.V, the net result, as well as distributable sums are determined by a regulation of the C.O.S.O.B.

Art. 10. — Any natural or legal person may enter the company's capital by purchasing new shares and has the right to repurchase, by the company, the shares in its possession.

Art. 11. — The general meeting of the V.I.C.A.V may authorize the board of directors or the executive board to suspend the repurchase of existing shares as well as the issuance of new shares when exceptional circumstances require it and if the interests of the shareholders so dictate. The board of directors or the executive board informs, in this case, immediately the C.O.S.O.B of the company's decision.

Art. 12. — A V.I.C.A.V must suspend the repurchase of its shares when its capital reaches half of the minimum amount fixed according to the methods provided for in Article 8 of this Ordinance.

TITLE II COMMON INVESTMENT FUNDS (F.C.P) Chapter I Definition and Purpose Art. 13. — The common investment fund denoted hereinafter as F.C.P, is a co-ownership of securities whose units are issued and repurchased at the request of the holders at the net asset value, increased or decreased, as the case may be, by fees and commissions. The F.C.P does not have legal personality.

Art. 14. — F.C.P units are securities. They may be subject to admission to listing on the securities exchange, under the conditions fixed by the C.O.S.O.B.

Art. 15. — The provisions of the civil code relating to undivided ownership do not apply to the F.C.P.

Art. 16. — Unit holders or their successors cannot provoke the division of the F.C.P.

Art. 17. — Unit holders are liable for the debts of the co-ownership only up to the amount of the F.C.P's assets and proportionally to their share.

Chapter II Formation Art. 18. — No F.C.P can be validly formed unless its draft regulations have been previously approved by the C.O.S.O.B. The conditions for approval are determined by a regulation of the C.O.S.O.B. In case of refusal of approval, the applicant retains all rights of appeal provided by the legislation in force.

Art. 19. — The draft regulations of an F.C.P must be prepared at the joint initiative of a manager and a depository institution provided for in Article 36 of this Ordinance, both founders of said F.C.P. The draft regulations must be prepared in accordance with the provisions of this Ordinance and the texts issued for its application.

Art. 20. — The subscription or acquisition of F.C.P units implies acceptance of the regulations.

Art. 21. — Initial units must be fully paid up upon the formation of the F.C.P.

Art. 22. — The manager is required, three (3) months at the latest after the approval of the fund, to complete the formalities related to the formation of the F.C.P. He must also publish the F.C.P regulations in a legal announcements journal.

Art. 23. — The initial assets of an F.C.P must not be less than an amount fixed by executive decree.

Chapter III Operation Art. 24. — Any person may acquire F.C.P units and has the right to repurchase the units in their possession. However, the F.C.P regulations may limit the acquisition of units to certain categories of persons and fix the conditions for exercising the right to repurchase units.

Art. 25. — Repurchase by the F.C.P of its units as well as the issuance of new units may be suspended, on a temporary basis, by the F.C.P manager when exceptional circumstances require it and if the interest of the holders so dictates, under the conditions fixed by the F.C.P regulations.

Art. 26. — Unit repurchases are suspended when the net assets of an F.C.P are less than half of the minimum amount fixed according to the methods provided for in Article 23 of this Ordinance. These provisions do not apply to F.C.Ps created for the benefit of enterprise employees within the framework of Ordinance No. 95-22 of 29 Rabie El Aouel 1416 corresponding to August 26 1995 on the privatization of public enterprises.

Art. 27. — In the event of suspension of issuance of new units or repurchase of existing units, the manager must immediately inform the C.O.S.O.B.

Art. 28. — The F.C.P manager is a natural or legal person who manages the fund in conformity with the regulations and in the exclusive interest of unit holders. He must have his registered office or residence in Algeria. He executes his obligations as an agent of the unit holders. He exercises all rights attached to the securities composing the portfolio of the F.C.P. He ensures that the unit holder benefits, proportionally to their contribution, from the income that all the F.C.P's investments generate. He represents the F.C.P vis-à-vis third parties. He manages the F.C.P for remuneration. He cannot use the F.C.P's assets for his own needs.

Art. 29. — Without prejudice to criminal proceedings, the F.C.P manager and the depository institution provided for in Article 36 of this Ordinance, are individually or jointly liable, as the case may be, for damages caused, by their faults, to third parties or unit holders, either due to violations of legislative or regulatory provisions, or due to violation of the F.C.P regulations.

Art. 30. — The F.C.P is dissolved by operation of law: — in the event of extinction of its corporate purpose; — in the event of cessation of function of the manager or of the depository institution if the replacement of one or the other does not occur within a maximum period of three (3) months; — when the net assets remain for more than six (6) months less than half of the minimum amount fixed according to the methods provided for by Article 23 of this Ordinance. The provisions of this paragraph do not apply to F.CPs created for the benefit of enterprise employees referenced in Article 26 of this Ordinance.

Art. 31. — The conditions for the dissolution of an F.C.P as well as the methods for the distribution of its assets are determined by the F.C.P regulations.

TITLE III COMMON PROVISIONS Chapter I Composition of Assets Art. 32. — The assets of an O.P.C.V.M consist essentially of securities, negotiable debt instruments and accessarily of liquidity.

Art. 33. — For the application of this Ordinance, securities are considered to be those governed by the provisions of Article 715 Bis30 of the commercial code as well as those of the same nature issued by the State and other public law legal entities.

Art. 34. — Negotiable debt instruments are considered to be debt securities issued and traded or susceptible of being traded on the money market in the forms and regulatory conditions in force.

Art. 35. — Liquidity is considered to be funds deposited on demand or at term not exceeding (2) two years.

Chapter II Asset Management Art. 36. — The custody of the assets of an O.P.C.V.M must be ensured by a unique depository institution distinct from the V.I.C.A.V or the F.C.P manager, chosen from a list of legal entities established by the minister in charge of finance. This institution must be designated in the articles of association of the V.I.C.A.V or the F.C.P regulations. It must, moreover, ensure the regularity of the decisions of the V.I.C.A.V or the F.C.P manager. Its liability is not affected by the fact that it entrusts to a third party all or part of the assets it is responsible for.

Art. 37. — The depository institution must have its registered office in Algeria.

Art. 38. — The creditors of the depository cannot claim payment of their claims on the assets of the O.P.C.V.M.

Art. 39. — The V.I.C.A.V, the F.C.P manager and the depository institution must present sufficient guarantees, particularly in terms of organization, of technical and financial resources as well as regarding the experience of their executives. The criteria that serve as the basis for the determination of the guarantees referred to in the above paragraph are defined by a regulation of the C.O.S.O.B.

Art. 40. — The investment policy of the V.I.C.A.V or the F.C.P manager must respond, in all cases, to the interests of the shareholders or unit holders.

Art. 41. — The prudential and management rules applicable to O.P.C.V.Ms are detailed by a regulation of the C.O.S.O.B.

Art. 42. — The merger, spin-off, transformation and dissolution of an O.P.C.V.M are subject to the approval of the C.O.S.O.B.

Chapter III Information and Control Art. 43. — The manager of an F.C.P, the board of directors or the executive board of a V.I.C.A.V designates an auditor for one or more fiscal years. The auditor is chosen by the O.P.C.V.M from a list established by the C.O.S.O.B.

Art. 44. — The auditor assesses the in-kind contributions and establishes, under his responsibility, an evaluation report of which a copy is communicated to the C.O.S.O.B.

Art. 45. — The auditor brings to the attention of the C.O.S.O.B as well as to that of the general meeting of the V.I.C.A.V or the manager of the F.C.P, any irregularities and inaccuracies he may have observed in the exercise of his functions.

Art. 46. — O.P.C.V.Ms must publish accounting and financial information, occasional, periodic and permanent, regarding their activity and intended for the public. This information concerns in particular: — the information prospectus submitted to the visa of the C.O.S.O.B before the issuance of the first shares or units, — the social accounts, — semi-annual and annual activity reports, — the composition of the assets. They must regularly publish the net asset value of the O.P.C.V.M share or unit. A regulation of the C.O.S.O.B specifies, as necessary, the nature of the media required for the publication of this information.

Art. 47. — The auditor verifies the above information before its transmission to the C.O.S.O.B and certifies its accuracy.

Art. 48. — O.P.C.V.Ms are subject to the control of the C.O.S.O.B. In this capacity, the commission may have proceedings conducted, in accordance with the provisions of Article 37 of Legislative Decree No. 93-10 of May 23, 1993 relating to the securities exchange, to investigate the activity of O.P.C.V.Ms.

Art. 49. — The C.O.S.O.B assesses the reliability of the information provided by the O.P.C.V.Ms mentioned in Article 46 of this Ordinance before their publication. It may request any additional information, and/or require, if necessary, the necessary modifications.

Art. 50. — O.P.C.V.Ms are required to communicate to the Bank of Algeria the information necessary for the preparation of monetary statistics.

Chapter IV Financial Provisions Art. 51. — The maximum amount of commissions that are collected, upon the subscription or repurchase of O.P.C.V.M shares or units, as well as the maximum amount of management fees are fixed by a regulation of the C.O.S.O.B.

Art. 52. — O.P.C.V.Ms must pay an annual commission to the C.O.S.O.B, the amount and methods of calculation of which are fixed by order of the minister in charge of finance.

Chapter V Sanctions Art. 53. — Any failure to comply with professional and ethical obligations on the part of the governing members of V.I.C.A.Vs and F.C.P managers as well as any violation of the legislative and regulatory provisions applicable to them are sanctioned by the disciplinary and arbitral chamber, in accordance with the provisions set forth in Articles 53, 55 and 56 of Legislative Decree No. 93-10 of May 23, 1993 relating to the securities exchange. The referral to the disciplinary and arbitral chamber shall be carried out in accordance with the provisions set forth in Article 54 of Legislative Decree No. 93-10 of May 23, 1993 relating to the securities exchange. The decisions of the disciplinary and arbitral chamber are pronounced, in accordance with Article 57 of Legislative Decree No. 93-10 of May 23, 1993 relating to the securities exchange.

Art. 54. — Violations of legislative and regulatory provisions punishable by the penalties provided for in Articles 55 to 58 of this Ordinance are brought before the competent ordinary courts.

Art. 55. — The executives of a V.I.C.A.V or the managers of F.C.Ps who have not proceeded to the publication of the required O.P.C.V.M information within the legal deadlines, are punishable by a fine of 50,000 DA to 100,000 DA.

Art. 56. — The executives of a V.I.C.A.V or the manager of an F.C.P who have not proceeded to the publication of the required O.P.C.V.M information, who have engaged in operations other than the management of a portfolio of securities and other titles, or who have proceeded to the sale of securities that these O.P.C.V.Ms do not possess, are punishable by a fine of 150,000 DA to 500,000 DA.

Art. 57. — The executives of a depository institution as well as any agent placed under their authority who execute instructions from a V.I.C.A.V or the F.C.P manager contrary to the legislation applicable to O.P.C.V.Ms, are punishable by imprisonment of 1 month to 6 months and a fine of 40,000 DA to 400,000 DA or of one of these two penalties only.

Art. 58. — The legal or de facto executives of an O.P.C.V.M having carried out collective investments in securities and other negotiable titles, without that it being approved under the conditions fixed by this Ordinance or those who have continued their activity in the event of withdrawal of approval, are punishable by imprisonment of 3 months to 18 months and a fine of 500,000 DA to 5,000,000 DA or one of these two penalties only.

Chapter VI Final Provision Art. 59. — This Ordinance shall be published in the Official Journal of the Algerian Democratic and Popular Republic. Done in Algiers, on 19 Chaâbane 1416 corresponding to January 10, 1996. Liamine ZEROUAL.