Financial Regulatory Authority Board Resolution No. 38 of 2021 on Forming the Board of Directors of the Central Securities Depository and Clearing Company and Nominating its Chairman and Members

FINANCIAL REGULATORY AUTHORITY

Chairman of the Authority

Resolution of the Board of Directors of the Authority No. (38) for the year 2021 dated 2021/3/21 Regarding the regulations for forming the Board of Directors of the Central Securities Depository and Clearing Company, and the conditions and procedures for nominating the Chairman and Board Members.

The Board of Directors of the Financial Regulatory Authority, Having reviewed the Law on Joint Stock Companies, Limited Liability Partnerships, Limited Liability Companies, and One-Person Companies issued by Law No. (159) of 1981; And the Capital Market Law issued by Law No. (95) of 1992; And the Central Depository and Clearing of Securities and Financial Instruments Law issued by Law No. (93) of 2000; And Law No. (10) of 2009 regulating supervision over non-banking financial markets and instruments; And the Board Resolution No. (96) of 2014 regarding nomination rules and standards for the Chairman or Board Members of the Central Securities Depository and Clearing Company from non-stock exchange representatives; And the Board Resolution No. (95) of 2017 regarding measures taken by the Authority in case of violations by central depository and clearing companies, and the rules for applying these measures; And the Board Resolution No. (100) of 2020 regarding corporate governance rules for companies operating in non-banking financial activities; And the Board Resolution No. (126) of 2020 regarding ownership structure controls for companies conducting central depository and clearing activities for government securities, and controls for forming boards of directors of companies conducting central depository and clearing activities; And after the approval of the Authority's Board in its session held on 2021/3/21;

Village, Building 136, Giza, Egypt Postal Code: 110 Tel: +202 35345350 Fax: +202 35370036 WWW.FRA.GOV.EG

(Article One) The Central Securities Depository and Clearing Company shall be bound by the following regulations when forming its Board of Directors:

1. The number of board members must not be less than five and not exceed nine, with the majority being experienced non-executives, including at least two independent members. The term "independent board member" refers to the definition in the Authority's Board Resolution No. (100) of 2020 regarding corporate governance rules for companies operating in non-banking financial activities.
2. The term of office for the company's Board of Directors shall be three years.
3. The Chairman and executive board members may not serve on the Board for more than three consecutive or separate terms.
4. The positions of Chairman and Managing Director/CEO may not be held by the same person, subject to the application of Clause (1-1-3) of the Authority's Board Resolution No. (100) of 2020 regarding corporate governance rules for companies operating in non-banking financial activities.
5. A board member may not simultaneously hold a position on the board of another company conducting central depository and clearing activities.
6. The company must use cumulative voting when electing board members.
7. The board composition must include at least one female member.

The following conditions must be met by a natural person nominated for the Chairman or Board membership, and exchange representatives in the company:

1. Possession of a suitable higher education qualification.
2. Possession of technical competence, suitability, and necessary leadership qualities for board members.
3. Good reputation and character, with no prior final conviction for a felony or a misdemeanor involving moral turpitude/trust, or one of the serious crimes stipulated in laws governing non-banking financial activities.
4. The Authority must not have issued more than one measure against the person during their board membership (excluding warnings), due to breach of duties/responsibilities, and they shall be barred from board membership for the two subsequent terms following the issuance of such measures.

(1) "Serious crimes" in applying this resolution refer to crimes punishable by imprisonment or a fine of not less than 500,000 Egyptian pounds in any laws governing non-banking financial activities, the Central Bank and Banking System Law, or the Anti-Money Laundering Law.

(Article Two) Participating members of the Central Securities Depository and Clearing Company who are entitled to nominate representatives for their groups to the Board of Directors must meet the following conditions:

1. They have practiced their licensed activity for at least three years and continue to do so.
2. They have not been previously suspended from practice, unless two years have passed since the suspension ended.
3. No legal measures have been previously taken against them, unless two years have passed since the measure ended, except for the measure stipulated in Clause (a) of Article 31 of the Capital Market Law.

The periods stipulated in this resolution are calculated from the date the nomination application window closes. The central depository company and its subsidiaries, or companies under actual control by the same natural/legal person, may not submit more than one candidate for board membership.

(Article Three) Candidates nominated as board members representing participating member groups must meet the following conditions:

1. The candidate is a Chairman or board member of companies operating in securities brokerage or custody activities, and if the custodian is a bank, the candidate must be responsible for its custody activity.
2. The candidate has at least seven years of experience in the capital market or in legal, accounting, financial, or technical fields related to the company's activities and operations.

(Article Four) Candidates nominated as experienced members not entitled to hold the Chairman or Managing Director positions must meet the following:

1. At least seven years of experience in the capital market or related legal, accounting, financial, or technical fields.
2. No conflicting interests with board duties that could affect their neutrality in deliberations or decision-making.
3. The candidate and their affiliated group(2) do not hold more than (0.5%) of the share capital of any participating members in the central depository and clearing company, nor hold a position in any of them or their holding/subsidiary companies.
4. The candidate or any first-degree relative is not linked by employment or contractual relationship with the central depository and clearing company.

(Article Five) Candidates nominated as experienced members entitled to hold the Chairman or Managing Director positions must meet the following:

1. At least ten years of experience in capital markets, financial or banking services, or related information technology.
2. No conflicting interests with board duties that could affect their neutrality in deliberations or decision-making.
3. The candidate and their affiliated group do not hold share capital in any participating members of the central depository and clearing company, nor hold a position in any of them or their holding/subsidiary companies.
4. The candidate or any first-degree relative is not linked by employment or contractual relationship with one of the participating member companies, nor holds a board position in any of the participating members or their holding/subsidiary companies.

(2) The concept of "affiliated group" wherever used in this resolution is determined according to Law No. (93) of 2000 and its executive regulations.

(Article Six) Nomination applications for the Chairman and Board membership, accompanied by supporting documents verifying compliance with required conditions as specified in this resolution, shall be submitted to the company. The company shall prepare four candidate lists as follows: (a) List of candidates for the Company's Chairman. (b) List of candidates representing participating member groups. (c) List of experienced candidates entitled to hold the Managing Director position. (d) List of experienced candidates not entitled to hold the Managing Director position.

(Article Seven) A committee formed by the Authority's Chairman via his decision shall examine and review nomination applications for the Chairman and Board membership. The committee examines candidate names and lists, verifies compliance with required conditions, and contacts the company to obtain documents related to candidates based on stipulated standards.

(Article Eight) The committee meets upon the Chairman's invitation, with a quorum requiring the majority of its members. It issues recommendations by a majority of attending members, and prepares a reasoned report detailing the final status, proposed results, and verification of legal compliance for each candidate, including reasons for excluding those failing conditions. The report is submitted to the Authority's Chairman for approval prior to being presented to the Board of Directors for final approval.

(Article Nine) After the Authority's Board approval, the company shall present the candidate lists specified in Article Six to the General Assembly for voting. Voting validity requires compliance with:

1. Selecting one candidate from the list in Clause (a).
2. Selecting the required number of candidates from the list in Clause (b) as stipulated by the company's articles of association, including at least one from brokerage companies and one from custody institutions.
3. Selecting at least one candidate from the list in Clause (c), with remaining experienced members selected based on the highest votes received by candidates in either lists (c) or (d).

(Article Ten) Interested parties may appeal the Authority's Board resolution approving nomination names/lists and board election results within five working days of notification or knowledge of the decision, before the Authority's Appeals Committee according to Article (53) of the Central Depository and Clearing Law. The Appeals Committee rules on appeals within a period not exceeding two weeks from the appeal deadline, and its decision is final and enforceable. Interested parties are notified of the committee's decision within one working day at most from its issuance.

(Article Eleven) The nomination examination committee specified in Article Seven prepares final candidate lists within the next working day following the Appeals Committee's decision (if any) or the expiration of the appeal period, whichever applies.

(Article Twelve) Board members and central depository and clearing company representatives (excluding stock exchange representatives), as well as participating member representatives on the board, are prohibited from holding positions concurrently in the company's Board of Directors and the Egyptian Exchange or the Investor Protection Fund for Non-Commercial Risks.

(Article Thirteen) The Authority's Board Resolution No. (96) of 2014 and Article Three of the Authority's Board Resolution No. (126) of 2020 referenced herein are repealed, along with any provision conflicting with this resolution.

(Article Fourteen) This resolution shall be published in the Egyptian Official Gazette and on the websites of the Authority and the Central Securities Depository and Clearing Company, and shall take effect from the day following its publication in the Official Gazette.

Chairman of the Board of Directors Dr. Mohamed Omran

Village, Building 136, Giza, Egypt Postal Code: 110 Tel: +202 35345350 Fax: +202 35370036 WWW.FRA.GOV.EG