Financial Regulatory Authority

FINANCIAL REGULATORY AUTHORITY

Chairman of the Authority

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Decision of the Board of Directors of the Financial Regulatory Authority

No. (105) for the year 2018 dated 16/7/2018

Regarding the Regulations for Companies Operating in the Activity of Establishing Companies that Issue Securities or Increase Their Capital, and the Rules for Regularizing Their Status

The Board of Directors of the Financial Regulatory Authority Having reviewed the Capital Market Law issued by Law No. (95) of 1992 and its Executive Regulations, and their amendments and the decisions issued thereunder, and Law No. 10 of 2009 regarding the regulation of supervision over non-banking financial markets and instruments, and Presidential Decision No. 192 of 2009 regarding the Basic Statute of the Financial Regulatory Authority, and Decision of the Minister of Investment and International Cooperation No. (40) of 2018 regarding amending some provisions of the Executive Regulations of Law No. (95) of 1992, and Decision of the Board of Directors of the Authority No. (53) of 2018 regarding the regulations for granting and maintaining licenses and the rules for owning shares of companies operating in non-banking financial activities and its amendments, and with the approval of the Board of Directors of the Authority in its session held on 6/7/2018.

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Decided

(Article One)

The provisions of this Decision regarding the regulations for Egyptian joint-stock or limited-by-shares companies licensed to engage in the activity of participating in the establishment of companies that issue securities or increase their capital shall apply as stipulated in Article (122) of the Executive Regulations of the Capital Market Law No. (95) of 1992, amended by Ministerial Decision No. (40) of 2018.

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(Article Two)

Scope of Application of Article (122) of the Executive Regulations of the Capital Market Law

The provisions of Article (122) of the Executive Regulations of the Capital Market Law shall apply to companies that engage in one or more of the non-banking financial activities.

a. Activities of companies operating in the capital market field, as follows:

1. Promotion and mobilization of subscriptions to securities.
2. Participating in the establishment of companies that issue securities or in increasing their capital.
3. Venture capital.
4. Clearing and settlement of securities transactions.
5. Formation and management of securities portfolios.
6. Investment funds.
7. Management of investment funds.
8. Securities brokerage.
9. Dealing, intermediation, and brokerage in bonds.
10. Securitization of financial rights.
11. Financial advisory services for securities.
12. Market maker.
13. Management services in the field of investment funds.
14. Valuation, classification, and ranking of securities.
15. Dissemination of information on securities.
16. Valuation and analysis of securities.
17. Rating.
18. Direct investment companies.

b. Insurance or reinsurance activities, or intermediation in insurance or reinsurance, or insurance consulting expertise or claims expertise and damage assessment, in accordance with the provisions of Law No. 10 of 1981.

c. Real estate financing or refinancing activities, or real estate intermediation or real estate valuation expertise, in accordance with the provisions of Law No. 148 of 2001 and the regulations of the Board of Directors of the Authority in this regard.

d. Financial leasing.

e. Factoring.

f. Microfinance in accordance with the provisions of Law No. (141) of 2014 and the regulations of the Board of Directors of the Authority issued in this regard.

And other companies for which a decision is issued by the competent Minister after the approval of the Board of Directors of the Authority to add other activities related to the securities field.

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(Article Three)

Establishment and Licensing Conditions for Companies Operating in the Activity of Participating in the Establishment of Companies that Issue Securities or Increase Their Capital in the Field of Non-Banking Financial Activities

The provisions of the establishment and licensing conditions stipulated in Capital Market Law No. 95 of 1992 and its Executive Regulations shall apply to the aforementioned companies, while complying with the provisions of Decision of the Board of Directors of the Authority No. 85 of 2018 dated 28/5/2018 regarding the conditions that must be met in the membership of the board of directors of companies subject to the supervision of the Board of Directors of the Authority.

The activity of participating in the establishment of companies that issue securities or increase their capital shall not be engaged in except after obtaining a license from the Authority to conduct the activity.

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(Article Four)

Required Expertise for Company Management Personnel

Without prejudice to the licensing requirements for the management personnel of companies participating in the establishment of companies that issue securities, in accordance with the Authority's regulations issued in this regard, the members of the board of directors of the company undertaking the aforementioned activity must possess legal and technical knowledge of all non-banking financial activities, as well as full mastery of the regulatory rules for this activity.

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(Article Five)

Rules for Shareholding in Companies Engaged in Non-Banking Financial Activities

Without prejudice to Article (27 bis) of the Insurance Supervision and Control Law, as well as the provisions of Chapter Twelve of the Executive Regulations of the Capital Market Law, particularly Articles (328 bis) and (328 bis 1) thereof, the companies shall comply with the provisions of Article Six of Decision of the Board of Directors of the Authority No. (53) of 2018 regarding the regulations for granting and maintaining licenses and the rules for owning shares of companies operating in non-banking financial activities.

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(Article Six)

Rules for Regularizing Status

Companies operating in the securities field and licensed to engage in the activity of participating in the establishment of companies that issue securities or increase their capital shall commit to regularizing their status in accordance with the provisions of these regulations by no later than 31/12/2018, ensuring that the value of the company's securities portfolio in non-banking financial activities is detailed in a statement showing the company's shareholdings in companies conducting non-banking financial activities subject to the Authority, along with the value and percentage of shareholding in their capital, certified by the Chairman of the Board of Directors of the company, based on the company's latest audited financial statements accompanied by an auditor's report.

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(Article Seven)

Companies and entities that hold a shareholding exceeding 50% in companies operating in non-banking financial activities, as well as their portfolios regardless of their specific legal system, or companies whose purpose is to engage in the activity of establishing or participating in companies operating in non-banking financial activities, shall regularize their status in accordance with the provisions of Law No. (95) of 1992, and shall notify the Authority within thirty days from the date of issuance of this decision with the following data:

• The initial contract or the company's articles of association, certified by the competent administrative authority according to the law governing the company.
• The decision licensing the establishment of the company.
• The latest audited financial statements of the company accompanied by an auditor's report.
• The company's objectives.
• A detailed statement showing the company's shareholdings, value, and percentage of shareholdings in the capital of other companies, certified by the Chairman of the Board of Directors and the auditor.
• Names of board members and managers and their details.

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(Article Eight)

Procedures for Companies Not Subject to the Provisions of Article 122 of the Executive Regulations of Law No. 95 of 1992 to Exit

Companies licensed to engage in the activity of participating in the establishment of companies that issue securities or increase their capital, which do not engage in the activity referred to in Article 122 of the Executive Regulations and wish to exit the scope of Law No. 95 of 1992 and its Executive Regulations, shall follow the following procedures:

1. Submit a request to the Authority expressing the desire to exit the scope of Law No. 95 of 1992, accompanied by the following:

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(Article Nine)

The competent departments of the Authority shall follow up on the implementation of this Decision in all matters pertaining to them.

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(Article Ten)

This Decision shall be published in the Egyptian Gazette and on the official website 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 of the Authority Dr. Mohamed Omran

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Smart Village, Building no. B-136, Giza
Postal Code: 12577
Tel.: (00202) 35345350 - Fax.: (00202) 35370036 www.FRA.gov.eg

Smart Village, Building 136 - B, Giza, Egypt
Postal Code: 12577
Tel.: +202 35370036 - Fax.: +202 35345350 info@fra.gov.eg