Board of Directors Decision No. (56) of 2014

Dated 13/4/2014

Regarding the necessary conditions and specifications to be met for the activity of dealing, brokerage, and intermediation in bonds Pursuant to Article (271) of the Executive Regulations of the Capital Market Law

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 the decisions issued to implement it; and the Central Depository and Registration of Securities Law issued by Law No. (93) of 2000 and its Executive Regulations; and Law No. (10) of 2009 concerning the regulation of supervision over non-banking financial markets and instruments; and Presidential Decision No. (191) of 2009 regarding the provisions organizing the Egyptian Exchange and its financial affairs; and Presidential Decision No. (192) of 2009 issuing the Basic Law of the Financial Regulatory Authority; and upon the approval of the Authority's Board of Directors in its meeting held on 13/4/2014;

Decided

(Article One)

Companies licensed to conduct the activity of dealing, brokerage, and intermediation in bonds must comply with the technological infrastructure requirements and information security systems stipulated in the Chairman of the Board of Directors Decision of the Financial Regulatory Authority No. (1005) of 2013.

The company's electronic system must allow for the issuance of daily reports clarifying at least the following:

1. The nature of the company's transactions (financing certificates – treasury bills – bonds), whether for its own account or on behalf of and for the account of its clients.

2. The market value of what the company holds (financing certificates – treasury bills – bonds), to be valued in accordance with Article (275) of the Executive Regulations, and whether the trades are for the company's account or for its clients' accounts, classified by the type of financial instrument:

• Bonds.

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(Article Two)

Companies dealing, brokering, and intermediating in bonds must prepare the necessary rules and systems to strengthen internal control and mitigate expected risks, specifically as follows:
First: The credit policy that determines the procedures and limits of open trades for dealing in treasury bills, bonds, or financing certificates.

Second: The investment risk policy applied by the company and the determination of the holding limit for bonds, treasury bills, or financing certificates.

Third: The company's general policy to ensure the effectiveness of the system for monitoring employees' compliance with obligations, through a set of guidelines as follows:

1. Account opening procedures.
2. Anti-money laundering procedures.
3. Transaction recording and execution.
4. Transaction settlement procedures.
5. Data retention procedures.
6. Client notification procedures.
7. Risk management.
8. Internal control.
9. Complaints and disputes procedures.

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(Article Three)

The controls stipulated in the Authority Chairman's Decision No. (24) of 2007 concerning licensing controls for employees of companies operating in securities brokerage apply to employees of companies dealing, brokering, and intermediating in bonds.

The Portfolio Manager must have at least ten years of experience in financial markets trading, of which at least five years must be in trading fixed-income instruments at banking institutions or securities companies.

In addition to the certificates specified in Appendix No. (1) of Decision No. (24) of 2007, a certificate confirming the study of the fundamentals of fixed-income instrument valuation is required for the Managing Director, Portfolio Manager, and Risk Manager.

In the event of licensing the dealing, brokerage, and intermediation in bonds activity alongside other activities of a securities company, duplication in the following positions is not required: (Financial Director – Internal Auditor – Anti-Money Laundering Officer).

(Article Four)

Companies licensed to conduct the activity of dealing, brokerage, and intermediation in bonds must comply with the following:

1. Its organizational structure must include one or more departments specializing in the dealing, brokerage, and intermediation in bonds activity if the company is licensed to conduct other activities.

2. Segregation of accounts for each licensed activity if the company is licensed to conduct other activities.

3. Segregation of client accounts from each other and from the company's accounts.

4. Preparation of work manuals for each activity based on the ongoing cycle, and maintaining separate records for each activity, including dedicated records and ledgers for each activity.

5. Maintaining at all times net liquid capital in accordance with the requirements of each activity individually, according to the financial standards issued by the Authority.

6. Providing automated systems that allow opening independent accounts for each client, issuing and processing documents and products, automated linkage with the exchange trading, clearing, settlement, and central depository systems, and generating account statements.

7. Prior written disclosure to its clients in case the company trades on behalf of its clients in bonds or financing certificates issued by a holding, subsidiary, or sister company, or issued by companies in which one of its board members, shareholders, or relatives up to the second degree holds 10% or more of its shares, or if any of these persons is a member of its board of directors.

(Article Five)

Companies licensed to conduct the activity of dealing, brokerage, and intermediation in bonds must document their status in accordance with the provisions of this Decision within a maximum of three months from its effective date.

(Article Six)

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

Chairman of the Board
Sherif Samy

46576

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