Regulation No. 04/CEMAC/UMAC/CM on the CEMAC Negotiable Debt Securities Market

OFFICIAL GAZETTE OF THE CENTRAL AFRICAN ECONOMIC AND MONETARY COMMUNITY REGULATORY FRAMEWORK FOR THE MARKET OF NEGOTIABLE DEBT SECURITIES OF THE CEMAC

Having regard to the Treaty establishing the Economic and Monetary Community of Central Africa (CEMAC) and its Protocol on the institutional system of the Community; Having regard to the Treaty establishing the Central African Monetary Union (UMAC), particularly Article 32, paragraph 2, fourth indent, concerning rules on the collection and allocation of financial savings; Having regard to the Statutes of the Bank of Central African States (BEAC), particularly Article 21; Having regard to the Convention of October 16, 1990 establishing the Central African Securities Commission (COBAC); Having regard to the Convention of January 17, 1996 on the harmonization of banking regulation in the Central African States; Having regard to the Regulation on the harmonization of exchange regulation in Central Africa; Having regard to the Regulation establishing a book-entry registration system for securities and other financial instruments; Considering the need to diversify financing channels for CEMAC economies, enhance capital mobility through an expanded range of financial instruments, and include new actors in the money market; Having regard to the deliberation of December 18, 2014 by the Monetary Policy Committee of the BEAC; Having regard to the unanimous opinion of the BEAC Board of Directors on March 20, 2015 in Yaoundé;

HAS UNANIMOUSLY ADOPTED THE REGULATION BELOW:

TITRE I: DISPOSITIONS GENERALES This Regulation establishes the issuance and management regime for negotiable debt securities, abbreviated as "NDS", in the CEMAC. Negotiable debt securities are financial instruments issued at the discretion of the issuer, traded on a regulated or over-the-counter market, each representing a debt claim for a specified term and bearing interest. Negotiable debt securities include deposit certificates, treasury bills, and negotiable medium-term bonds. Deposit certificates, with an initial term of two years or less, are issued by credit institutions and deposit and conservation funds, or any other body acting in their place. Treasury bills, with an initial term of two years or less, are issued by the issuers listed in points 3 to 9 of Article 13. Treasury bill issuers, except States, must have prepared annual accounts certified by an approved statutory auditor for at least the three years preceding the issuance in question. Negotiable medium-term bonds, with an initial term exceeding two years and seven years or less, are issued by all issuers mentioned in Article 13. Medium-term bond issuers, except States, must have prepared annual accounts certified by an approved statutory auditor for at least the three years preceding the issuance in question.

Negotiable debt securities are dematerialized and registered in accounts with a custodian. Only the following may act as custodians: corporate issuers, credit institutions, the BEAC, and approved financial intermediaries and other bodies.

TITRE II: CONDITIONS D'EMISSION DES TITRES DE CREANCES NEGOCIABLES The unit nominal value of negotiable debt securities is set at one million Central African CFA francs (XAF) or a multiple thereof. Negotiable debt securities may be issued at a price different from par. In such cases, the issuer must publish the annual actuarial yield rate at issuance. The interest rate of negotiable debt securities is freely set by the issuer. It is fixed for issuances with a life at issuance of one year or less. When the life at issuance exceeds one year, this rate may be variable and indexed to a reference money market rate. Only negotiable debt securities with a life at issuance of one year or less may bear pre-paid interest payable upon subscription. For those with an initial term exceeding one year, interest is payable annually or at maturity. Negotiable debt securities may be guaranteed by a credit institution or any other public or private body authorized to provide such guarantees, in accordance with prevailing regulations. Issuers holding certain, liquid, and due claims may back their issuance with such claims as collateral. The domiciliary agent ensures the accuracy and valuation of these claims, after certification by approved statutory auditors.

TITRE III: EMETTEURS DES TITRES DE CREANCES NEGOCIABLES

1. Credit institutions;
2. Deposit and conservation funds or any other body acting in their place;
3. Non-credit enterprises, provided they are incorporated as public limited companies under the conditions required by the OHADA Uniform Act on commercial company law and economic interest groups;
4. Public sector enterprises;
5. Development financing and guarantee bodies;
6. Public establishments;
7. Social security and provident funds;
8. Common debt funds or any securitization body;
9. States. The entities authorized to issue negotiable debt securities, listed above, are approved by the BEAC based on an issuance program. The approval application file must include, in addition to the issuance program, financial documentation covering the applicant's activity and financial situation. The content and transmission procedures for this financial documentation are specified by decision of the BEAC Governor. Only issuers established in the CEMAC may issue negotiable debt securities under this Regulation. Issuers with outstanding arrears on negotiable debt securities issued under this Regulation may not issue others until the debt related to previous issuances is fully settled and after obtaining the BEAC's opinion.

TITRE IV: OBLIGATIONS D'INFORMATION DES EMETTEURS DE CREANCES NEGOCIABLES Financial documentation and its updates must be made available to the public at the issuer's headquarters, with domiciliary banks for the securities, and on the BEAC website. Issuers must publicly disclose a rating of their issuance program, obtained from a specialized agency approved by the national monetary authority or the competent community institution. Failing this, they must have a guarantor as defined in Article 11 of this Regulation. Credit institutions must comply with COBAC's prudential solvency ratios; Deposit and conservation funds or any other body acting in their place. As long as negotiable debt securities are in circulation, the financial documentation provided for in Article 14 must be updated annually within thirty (30) days after the holding of the annual general meeting of shareholders (or the body acting in its place), deliberating on the issuer's accounts for the last financial year. The update of financial documentation becomes immediate upon any modification to the rating, the outstanding amount ceiling, the guarantor's identity, the domiciliary establishment, guarantee terms, and generally upon the occurrence of an event likely to affect the evolution of issued security prices or the successful completion of the issuance program. Issuers communicate to the BEAC the date of the next general meeting (or body acting in its place) as soon as they become aware, as long as their negotiable debt securities are in circulation.

TITRE V: DOMICILIATION DES TITRES DE CREANCES NEGOCIABLES ARTICLE 20: Only credit institutions are authorized to act as domiciliary agents. They may perform the function of domiciliary agent for their own account. Other issuers must domicile their securities with a domiciliary agent that is a credit institution. The domiciliary agent ensures the regularity of issuance conditions, material organization, and financial service at its counters on behalf of the issuer. The domiciliary agent communicates to the central depository information regarding the issuer and issuance terms. Prior to the issuance of negotiable debt securities, a written agreement is concluded between the issuer and a domiciliary agent. This agreement is not required when the issuer acts as its own domiciliary agent. The issuer's option to subsequently replace or designate other domiciliary agents must be expressly stated in the contract, along with the remuneration conditions for the financial service. A copy of the agreement between the issuer and a domiciliary agent is transmitted to the BEAC. Negotiable debt securities are registered in accounts, in the name of the holder, with a custodian. Ownership of negotiable debt securities results from their registration in the holder's account with a custodian. The book-entry registration of negotiable debt securities establishes, vis-à-vis all parties, the ownership of the account holder over the registered negotiable debt securities and all related rights. Custodians carefully distinguish at all times in their accounting, negotiable debt securities belonging to them as principal and those belonging to their clients. The contractual relationship between the account holder and the custodian is imperatively provided for and formalized by a written agreement containing, among others, the following mandatory mentions:

• the identity of the account holder;
• an explicit mention of the deposit contract;
• the pricing of services provided;
• the validity period of the agreement;
• confidentiality obligations imposed on the custodian in accordance with prevailing laws and regulations regarding professional secrecy;
• the characteristics of orders likely to be addressed to the custodian, conforming, where applicable, to market rules on which these orders will be executed;
• the method of transmitting orders;
• the content and procedures for informing the order giver on the realization of the service;
• the time limit for contesting executed operations;
• the periodicity of account statement transmission. A custodian may only use client securities for its own account with the express and written consent of the account holder. Failing such consent, the account holder is entitled to claim ownership and exercise all rights attached thereto.

TITRE VI: CIRCULATION DES TITRES DE CREANCES NEGOCIABLES Any investor, natural or legal person, resident or non-resident, may acquire negotiable debt securities. To animate the market for negotiable debt securities or ensure its liquidity, an issuer may acquire and retain the negotiable debt securities it has issued up to 10% of the outstanding amount of each issuance program, subject to informing the BEAC. In addition to the issuer, only the following are authorized to place or trade negotiable debt securities:

• credit institutions;
• deposit and conservation funds or any other body acting in their place;
• investment service providers or stock exchange companies. Book-entry negotiable debt securities are transferred by account-to-account transfer. The transfer of ownership of negotable debt securities results from their registration in the acquirer's account. Any debit operation of a securities account is subject to an instruction signed by the account holder or their duly authorized representative. Issuers inform the BEAC of early repayments made on the negotiable debt securities they have issued. Failure to deliver or settle as agreed between the parties on the due date automatically releases the non-defaulting party from all obligations.

TITRE VII: DEPOSITAIRE CENTRAL DES TITRES DE CREANCES NEGOCIABLES Custodians are affiliated to a central depository with which they open securities accounts and domicile all negotiable debt securities held in their custody. The central depository distinguishes, for each affiliated custodian, the negotiable debt securities it holds for its own account and those belonging to its clients. The central depository is accountable for the issuance of negotiable debt securities. It opens a specific account for each issuance of negotiable debt securities. The central depository guarantees compliance with the equality between the number of issued negotiable debt securities and the number of securities registered in its books under the names of the custodians. Negotiable debt securities may be pledged in accordance with relevant provisions of the OHADA Uniform Act on the organization of security interests. Negotiable debt securities may serve as collateral for treasury operations, including ordinary or delivered repurchase agreements, securities lending and borrowing, as well as forward purchases and sales of securities. The BEAC is the supervisory body for the market for negotiable debt securities and ensures its proper functioning. It verifies, among other things, that issuers comply with the issuance conditions provided for by this Regulation and its implementing texts. The BEAC may, in its capacity as the supervisory body for the market for negotiable debt securities, prohibit or suspend an issuer's issuance if it fails to comply with the regulations governing the CEMAC negotiable debt securities market. In the event of opening a collective procedure for clearing the liabilities of a custodian or withdrawal of its approval, the BEAC designates another custodian to which client securities are transferred. Security owners may subsequently transfer them to the custodian of their choice. Custodians must comply with rules established regarding the fight against money laundering and terrorist financing. Issuances of negotiable debt securities and the use of resources collected by these issuances are governed by the prevailing exchange regulations in force in the CEMAC. The BEAC ensures market transparency, notably by publishing legal texts, documentation of various programs, and statistics on market evolution. The implementation modalities of this Regulation are defined by the BEAC Governor as needed. Provisions of this Regulation may be supplemented or modified by a community regulation adopted by the UMAC Ministerial Committee. This Regulation enters into force as of its signature date and repeals prior contrary provisions. It is published in the Official Gazette of the Community.