Decision No. CM/15/09/2022 Amending the General Regulation on the Organization, Operation and Supervision of the UMOA Financial Market in Relation to the Establishment of a Regulatory Framework for the Islamic Capital Market

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WEST AFRICAN MONETARY UNION

COUNCIL OF MINISTERS

THE PRESIDENT

DECISION NO. CM/15/09/2022

AMENDING THE GENERAL REGULATION ON THE ORGANIZATION, OPERATION AND SUPERVISION OF THE UMOA FINANCIAL MARKET IN RELATION TO THE ESTABLISHMENT OF A REGULATORY FRAMEWORK FOR THE ISLAMIC CAPITAL MARKET

The UMOA Council of Ministers,

Having regard to the Convention of July 3, 1996 establishing the Regional Council for Public Savings and Financial Markets (CREPMF), particularly Article 1;

Having regard to the Annex to the Convention of July 3, 1996 on the Composition, Organization, Operation and Powers of the Regional Council for Public Savings and Financial Markets, particularly Articles 14 and 22;

Having regard to Decision No. 001/97 of the UMOA Council of Ministers dated November 28, 1997 on the General Regulation relating to the Organization, Operation and Supervision of the UMOA regional financial market;

Having regard to the deliberations of the Regional Council at its 91st ordinary session held on September 2, 2022;

Having regard to the deliberations of the UMOA Council of Ministers at its ordinary session on September 30, 2022;

DECIDES

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Decision No. CM/15/09/2022

Article 1: The first article of the General Regulation of November 28, 1997 relating to General Provisions is amended as follows:

New Article 1 of the General Regulation
In accordance with Article 14 of the Annex to the Convention of July 3, 1996 establishing the Regional Council for Public Savings and Financial Markets (hereinafter "the Regional Council"), this General Regulation adopted by the UMOA Council of Ministers sets out the powers of the CREPMF and the practical arrangements for the organization, operation and supervision of the regional financial market.

Article 2: The second article of the General Regulation of November 28, 1997 relating to General Provisions is amended as follows:

New Article 2 of the General Regulation
The Regional Council shall have the following powers:
a) organizing public savings campaigns; b) authorizing and supervising market structures and commercial operators; c) supervising the regularity of stock exchange transactions; d) adopting any subsequent regulatory provisions it deems necessary to ensure the organization, supervision, operation and preservation of integrity, transparency and security of transactions on the regional financial market; e) taking any measures to enable the authorization of new securities and financial instruments.

Article 3: The third article of the General Regulation of November 28, 1997 relating to General Provisions is amended as follows:

New Article 3 of the General Regulation
The Regional Council shall enact provisions applicable:
a) to public savings campaigns and, in particular, stock exchange transactions and other investment products; b) to the operating conditions of market structures and commercial operators; c) to new financial securities issued or capable of being issued on the regional financial market. The Regional Council shall be consulted on any project to open new financial markets as well as on any project to negotiate new financial products at the Regional Securities Exchange.

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Decision No. CM/15/09/2022

It shall exercise its right of veto if it considers that the new financial products or markets envisaged by the Regional Securities Exchange are not of a nature to ensure the security and protection of public or private savings that may be invested therein.

Article 4: The seventy-second article (72) of the General Regulation of November 28, 1997 relating to collective management is amended as follows:

New Article 72 of the General Regulation
Collective management within the Union is carried out by Collective Investment Undertakings, referred to as CIUs, grouped into:
a) Collective Investment Undertakings in Securities, referred to as CIUS; or b) Alternative Investment Funds, referred to as AIFs; c) Collective Investment Undertakings compliant with the rules and principles of Islamic finance, known as "Islamic CIUs". These CIUs may take either a contractual form of Common Investment Funds managed by a Management Company, or a statutory form of Variable Capital Investment Company or any other forms specified by an Instruction of the Regional Council. An Instruction of the Regional Council establishes the form, classification, approval and registration rules, operating rules as well as prudential rules specific to each category of CIU and their Management Companies. An Instruction of the Regional Council defines the rules and provisions applicable to Islamic CIUs. CIUs are required to obtain the prior approval of the Regional Council before the start of subscription operations.

Article 5: The seventy-fifth article (75) of the General Regulation of November 28, 1997 relating to collective management is amended as follows:

New Article 75 of the General Regulation
The assets of a CIUS may consist only of cash, negotiable debt securities, financial securities compliant with the principles and rules of Islamic finance, and securities issued within the zone. By way of derogation from the above principle, the Regional Council may authorize investments in other securities or negotiable debt instruments.

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Decision No. CM/15/09/2022

Article 6: Subtitle II of TITLE III of the General Regulation of November 28, 1997 relating to the Organization of the regional financial market is amended as follows:
NEW SUBTITLE II: ISSUANCES OF SECURITIES AND FINANCIAL INSTRUMENTS COMPLIANT WITH THE PRINCIPLES AND RULES OF ISLAMIC FINANCE

Article 7: Chapter II is inserted into Subtitle II of TITLE III of the General Regulation of November 28, 1997 relating to the Organization of the regional financial market, with the following content:
"Chapter II: Financial Instruments Compliant with the Principles and Rules of Islamic Finance"

New Article 112 of the General Regulation
The regional financial market actors referred to in Articles 7 and 72 who wish to participate in the structuring, organization, marketing or distribution of instruments of Islamic capital markets, as well as issuers wishing to issue such instruments, must obtain the opinion of a Sharia Compliance Board (hereinafter "Sharia Board"). An Instruction of the Regional Council specifies the rules relating to the organization, operation and procedures for the intervention of the Sharia Compliance Board.

New Article 113 of the General Regulation
Financial instruments compliant with the principles and rules of Islamic finance are considered to be securities issued by public or private legal entities, transferable by book entry or delivery, which have been subject to prior analysis and approval by an independent Sharia Compliance Board. The issuance procedures, technical characteristics and rights conferred by financial instruments compliant with the principles and rules of Islamic finance are defined in a Regulation of the UMOA Council of Ministers.

New Article 114 of the General Regulation
Subject to approval and validation by a Sharia Compliance Board as referred to in Article 112 and without prejudice to existing regulations, certain securities may be compliant with the principles and rules of Islamic finance.

New Article 115 of the General Regulation
The Regional Council reserves the right, if it deems necessary, to consult a Sharia Compliance Board not affiliated with a financial market actor or any other specialized entity it considers competent regarding compliance with the principles and rules of Islamic finance.

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Decision No. CM/15/09/2022

The Regional Council may establish a Central Sharia Compliance Board.
An Instruction of the Regional Council sets out the powers and procedures for the intervention of the Central Sharia Compliance Board.
Where applicable, the compliance opinion issued following consultation by the Regional Council with a Sharia Compliance Board or, where applicable, the Central Sharia Compliance Board may prevail, on the decision of the Regional Council, over any other compliance opinion issued by a Sharia Compliance Board of a financial market actor.

New Article 116 of the General Regulation
The Regional Council shall set, by Instruction, a timeframe for the dematerialization of all other securities in circulation.

Article 8: The one hundred thirty-sixth article (136) of the General Regulation of November 28, 1997 is amended as follows:

New Article 136 of the General Regulation
When issuing public debt securities or securities compliant with the principles and rules of Islamic finance, or guaranteed by a State or group of States, the governments of the States or public authorities shall prepare an information note which is transmitted to the Regional Council before the issuance date of the securities. The note is exempt from prior approval before its distribution to the public. However, it must contain the following information:
a) the name of the State or public authority responsible for the issuance; b) a description of the offered securities and their terms; c) the nominal value and subscription price; d) the purpose and use of the funds raised; e) the public distribution plan for the securities; f) the remuneration terms for the debt evidenced by these securities.

Article 9: The one hundred seventy-sixth article (176) of the General Regulation of November 28, 1997 is amended as follows:

New Article 176 of the General Regulation
Any solicitation of the UMOA public by a non-resident entity, or on its behalf, to propose the acquisition of investment products is subject to prior authorization by the Regional Council, subject to the compliant opinion of the foreign exchange control authority in each of the concerned countries. Any marketing of foreign-law CIUs must be subject to prior information to the CREPMF within fifteen (15) days preceding the start of marketing in one of the UMOA countries, provided that it is a private placement and that the CIU manager and the CIU are registered in a country with equivalent rules as assessed by the CREPMF. In the absence of equivalence, the CIU must obtain a visa from the CREPMF before commencing marketing in one of the UMOA countries.

Article 10:
All prior provisions contrary to this Decision are hereby repealed.

Article 11:
This Decision, which enters into force from the date of its signature, shall be published wherever necessary.

Done in Dakar, on September 30, 2022

For the UMOA Council of Ministers,

The President

(Signature)

Sani YAYA