Capital Market Authority Board Decision No. (51) of 2014 (Updated 2020 Version)

Decision of the Board of Directors of the Authority No. (51) of 2014 Dated 13/4/2014 Regarding the conditions to be met by promoters of an investment fund company, according to the latest amendment dated 16/8/2020

Board of Directors of the General Authority for Financial Supervision

Having reviewed:

• The Capital Market Law issued by Law No. (95) of 1992 and its executive regulations and decisions issued pursuant thereto;
• The Central Depository and Registry Law for Securities issued by Law No. (93) of 2000 and its executive regulations;
• Law No. (10) of 2009 regarding the regulation of supervision over non-banking financial markets and instruments;
• Presidential Decree No. (191) of 2009 regarding the rules organizing the Egyptian Exchange and its financial affairs;
• Presidential Decree No. (192) of 2009 issuing the Statute of the General Authority for Financial Supervision; And upon approval by the Board of Directors of the Authority in its meeting held on 13/4/2014;

Decided:

Article One As of the date of issuance of this Decision, it is required that the promoters of an investment fund company be among the following entities and persons:

1. Financial institutions.
2. Legal entities that promote investment or have developmental activities.
3. Companies that conduct financial activities other than those mentioned in item (1).
4. Qualified investors with financial competence.

For the purposes of applying the provisions of this Decision, "Financial Institution" refers to the following:

1. Egyptian banks and branches of foreign banks subject to the supervision of the Central Bank of Egypt.
2. Insurance or reinsurance companies.
3. Companies whose purpose is to participate in the establishment of companies that issue securities or increase their capital, provided that more than 50% of their capital is continuously invested.
4. Companies operating in the securities field, including bond brokerage companies and primary dealers.
5. Venture capital companies.
6. Real estate financing companies.
7. Arab, regional, and foreign financial institutions.
8. Investment fund management companies (fund managers) and asset management companies (companies engaged in the activity of managing investment funds and forming and managing securities portfolios).

In all cases, it is required that the paid-up capital or the funds managed by the aforementioned institutions do not exceed EGP 30 million or its equivalent in foreign currencies.

Furthermore, "Qualified Investors" for the purposes of applying this Decision refers to the following:

1. Public legal entities.
2. Pension funds.
3. Asset management companies whose paid-up capital does not exceed EGP 1 million.
4. Natural persons with experience who have not been employed for less than three years in the management of banks and financial institutions, or in credit, asset management, and investment activities therein.
5. Natural persons owning securities or financial instruments valued at more than EGP 500,000.
6. Private insurance funds whose total managed assets exceed EGP 100 million.

1 - The Decision was amended by Board Decision No. (108) dated 25/9/2016 and Decision No. (125) dated 16/8/2020.

Article Two Capital contribution in an investment fund company shall be subject to the following:

1. The total contribution of the fund's promoters shall not exceed the entire issued capital.
2. The contribution of financial institutions shall not exceed 25% of the fund company's capital.
3. The contribution ratio of legal entities, including financial institutions, shall not exceed 75% of the fund company's capital.
4. The ratio of Egyptian promoters shall not exceed 51% of the fund company's capital.

The Authority's Board of Directors may grant full or partial exemptions from the ratios stipulated in this Article for reasons it deems appropriate.

2 - Item (8) was added to the list of financial institutions in Article One by Board Decision No. (125) dated 16/8/2020. 3 - Item (6) in the final paragraph regarding qualified investors in Article One was added by Board Decision No. (108) dated 25/9/2016.

Article Three The following conditions must be met by entities eligible to participate in the establishment of the fund company:

1. The entity must not be in a state of financial insolvency or bankruptcy.
2. No member of the entity's board of directors or management must have previously been convicted of a felony or a misdemeanor involving moral turpitude or breach of trust, unless their reputation has been restored. This shall be confirmed by a signed declaration from the entity's board chairman or authorized representative, under the entity's responsibility.
3. No administrative measures or penalties shall have been taken against any participating entity by its supervisory and regulatory authority, unless the reasons for such measures or penalties have been resolved and six months have elapsed since then.

The provision in item (2) shall also apply to natural persons participating in the establishment of the fund company.

Article Four To maintain ownership of shares in the fund company, the conditions stipulated in this Decision must continue to be met, and prior approval from the Authority must be obtained.

Article Five This Decision shall be published in the Egyptian Gazette and on the Authority's website, and shall take effect from the day following its publication in the Egyptian Gazette.