Circular Letter No. (1)

Issued on 18/7/2013

To:

Companies operating in the activity of establishing and managing investment funds, and Banks Establishing investment funds and Insurance Companies.

Further to Circular Letter No. (52) issued by the Authority on 26/3/2009, which concluded that it is permissible for the bank to retain the securities in which investment funds established by it invest their funds with a commitment to comply with any subsequent regulations issued by the Authority to the contrary, and with reference to what is required by the provisions of the following articles:

First: Article (38) of Law No. 95 of 1992, which states as follows: "Securities in which the fund invests its funds shall be held with one of the banks subject to the supervision of the Central Bank of Egypt, provided that this bank is not a shareholder or a shareholder in the owning company of the fund, or the company managing its activity."

Second: Article (161) of the Executive Regulation of Law No. 95/1992, which states as follows: "The investment manager shall hold the securities in which the fund invests its funds with one of the custodian trust companies among banks or companies licensed to practice this activity, provided that the custodian is not a shareholder in the fund or the investment manager or any of the companies affiliated with them according to the regulations set by the Authority."

Third: Article (173) of the Executive Regulation of Law No. 95/1992, which states as follows: "Banks and insurance companies may, after obtaining approval from the Central Bank of Egypt or the Egyptian Insurance Supervision Authority, as applicable, directly conduct the activity of proposed investment funds after obtaining a license from the Authority in accordance with the regulations set by the Authority. In the absence of a specific provision in this section regarding investment funds established by banks and insurance companies, the provisions and procedures prescribed for investment fund companies set forth in the first section of the second chapter of the third part of this Executive Regulation shall apply."

Given the absence of a specific provision exempting funds established by banks or insurance companies from the provisions of Article (161) of the Executive Regulation of Law No. 95 of 1992, the Authority emphasizes to all licensed entities for establishing investment funds, including those that have already established funds, the necessity to comply with the provisions of Article (83) of Law No. 95/1992 and Article (161) of the Executive Regulation, and to ensure contracting with a custodian that meets the full independence requirements stipulated in Article (161) of the Executive Regulation, and obtain the Authority's approval indicating a change in the custodian.

Dr. Mohamed Said
Deputy Chairman of the Authority

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