Instruction No. 069/AMF-UMOA/2023 on Collective Investment Undertakings Compliant with the Principles and Rules of Islamic Finance in the UMOA Regional Financial Market

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INSTRUCTION NO. 069/AMF-UMOA/2023

ON COLLECTIVE INVESTMENT UNDERTAKINGS COMPLIANT WITH THE PRINCIPLES AND RULES OF ISLAMIC FINANCE ON THE UMOA REGIONAL FINANCIAL MARKET

The Financial Markets Authority of the West African Monetary Union (AMF-UMOA)

Having regard to the revised Treaty of the West African Monetary Union (UMOA) dated July 12, 2019, which entered into force on October 1, 2022, amending the name of the Regional Council for Public Savings and Financial Markets (CREPMF) to the Financial Markets Authority of the UMOA (AMF-UMOA);

Having regard to the Convention of July 3, 1996 establishing the Regional Council for Public Savings and Financial Markets, particularly its Annex on the composition, organization, functioning, and powers of the Regional Council for Public Savings and Financial Markets;

Having regard to General Regulation No. 001/97 of November 28, 1997 on the Organization, Functioning, and Supervision of the UMOA regional financial market, amended by Decision No. CM/15/09/2022 of September 30, 2022;

Having regard to Regulation No. 10/2022/CM/UEMOA on Islamic financial instruments, self-managed Sukuk issuing companies, and Sukuk issuing funds in the UMOA;

Having regard to Decision No. 004 of April 29, 2021/CM/UMOA appointing the President of the Regional Council for Public Savings and Financial Markets;

Having regard to Instruction No. 66/CREPMF/2021 of December 16, 2021 on Collective Investment Undertakings and their Management Companies on the UMOA regional financial market;

Having regard to the deliberations of the AMF-UMOA in its session on November 18, 2022;

HAS ADOPTED:

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Article 1: Definition

For the purposes of this Instruction, "Islamic CIUs" means Collective Investment Undertakings compliant with the principles and rules of Islamic finance as set forth by the Compliance Council. Islamic CIUs are established in accordance with Article 3 below.

Article 2: Purpose

This Instruction sets out the rules governing Islamic CIUs and their Management Companies on the UMOA regional financial market.

Without prejudice to the provisions of this Instruction, other applicable provisions in force for market participants shall apply to Islamic CIUs, unless otherwise provided by this Instruction.

Article 3: Typology of Islamic CIUs and Applicable Laws

Islamic CIUs may be established under one of the legal forms provided for in the Instruction on Collective Investment Undertakings and their Management Companies on the UMOA regional financial market.

The provisions of the Instruction referred to in the first paragraph above shall apply to Islamic CIUs, unless otherwise provided by this Instruction.

Article 4: Approval Application File

When applying for the approval of an Islamic CIU, the application file shall be prepared in accordance with the Circular on documents and information to be attached to an approval application, as well as the procedures for filing registration applications and periodic reports.

In addition to the documents requested in Annex 1 of the aforementioned Circular, the approval file must include:

• the composition of the Compliance Council established for the Islamic CIU;
• the letter of appointment and charter of the Compliance Council;
• the audit plan for compliance with the principles and rules of Islamic finance;
• the Key Information Document including the investment strategy, compliant with the principles and rules of Islamic finance;
• the compliance certificate issued by the Compliance Council.

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Article 5: Information to be Provided to AMF-UMOA

An Islamic CIU is subject to compliance with the Circular on key information for investors and the Circular on the content of CIU prospectuses.

In addition to the requirements of the aforementioned Circular, the articles of association or regulations of the Islamic CIU and the prospectus must notably state the following information:

• the Islamic CIU was established and operates in accordance with the principles and rules of Islamic finance as defined and approved by the Compliance Council;
• the identity of the members of the Compliance Council and a summary of their expertise;
• the investment strategy approved by the Compliance Council and applied in the Islamic CIU;
• the internal or external Sharia compliance audit unit and its composition;
• the method for managing income non-compliant with the principles and rules of Islamic finance, as defined and approved by the Compliance Council, where applicable;
• the determination and calculation method for the share to be paid by the Islamic CIU, where applicable, to a charitable organization, including the name and contact details of the beneficiary charity;
• the fees for compliance with the principles and rules of Islamic finance borne by the Islamic CIU, where applicable as included in management fees.

An Islamic CIU is subject to compliance with the requirements of the Circular on information to be provided to AMF-UMOA. The table regarding semi-annual and annual information must include:

• the composition of the Compliance Council and any changes thereto;
• any significant modification occurring in the Islamic CIU.

Article 6: Fees of the Islamic CIU

An Islamic CIU is subject to compliance with the requirements of the Circular on CIU fees. In addition to the commissions and fees provided for in the aforementioned Circular, an Islamic CIU may charge fees related to compliance with the principles of Islamic finance and must disclose them in the prospectus, where applicable.

Article 7: Modification of Characteristics of the Islamic CIU

In case of modification in the composition of the Compliance Council or changes in the investment strategy or management procedures of the Islamic CIU, the General Assembly of the Islamic CIU or the Management Company of the Islamic CIU shall submit to AMF-UMOA the approval form as provided for in the Circular on key information for investors and the Circular regarding the content of CIU prospectuses mentioned in Article 10, adding the modifications to the composition of the Compliance Council.

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Article 8: Compliance Council

Each Islamic CIU must have a Compliance Council for the principles and rules of Islamic finance, whose missions, conditions, and procedures are set out in the Instruction on Compliance Councils for the principles and rules of Islamic finance regarding Market Participants and Issuers.

The Compliance Council is established by the regulations of the Islamic CIU.

The Board of Directors or Supervisory Board of the Islamic CIU, or its Management Company, shall ensure that the Compliance Council has the necessary means and information to perform its functions independently and objectively. In particular, it must ensure that the Compliance Council is not subject to any influence from the Executive Body or its own members.

The decisions and/or certificates of the Compliance Council are binding on the Islamic CIU.

Article 9: Audit for compliance with the principles and rules of Islamic finance

An Islamic CIU must have an internal or external Sharia compliance audit unit responsible for examining and controlling the compliance of the Islamic CIU with the principles and rules of Islamic finance in accordance with compliance certificates and decisions of the Compliance Council, and for preparing periodic reports to be presented to said Council, the Board of Directors or Supervisory Board of the Islamic CIU, or its Management Company.

The audit unit is composed of one or more specialists in Islamic finance.

The Compliance Council must ensure, once a year, the effectiveness of the compliance audit system.

The Board of Directors or Supervisory Board of the Islamic CIU, or its Management Company, must guarantee to said audit unit all documents and explanations it deems necessary for the exercise of its missions.

When said audit is outsourced, the choice of the auditor must be previously approved by the Board of Directors or Supervisory Board of the Islamic CIU, or its Management Company.

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Article 10: Annual Sharia Compliance Audit Report

The Compliance Council presents an annual Sharia compliance audit report on the activities of the Islamic CIU to the General Assembly of the Islamic CIU or its Management Company.

The Compliance Council may rely on the audit unit provided for in Article 8 below to prepare said report.

This annual report must notably include the following annexes: a. The list of members of the Compliance Council; b. The Compliance Certificate issued by the Compliance Council; c. A synthesis and conclusions of the Sharia compliance audit report; d. Proof of payment, where applicable, of the donation share to the charity organization approved by the Compliance Council as provided for in the regulations of the Islamic CIU.

The provisions relating to financial statements regarding the procedures and deadlines for making them available to shareholders or unitholders, dissemination, and filing with AMF-UMOA shall apply to the annual report of the Compliance Council, in accordance with the regulations in force for each form of Collective Investment Undertaking.

Article 11: Evaluation and Periodic Reports

In addition to preparing the annual Sharia compliance report on CIU activities established by the Compliance Council, Islamic CIUs are subject to compliance with the requirements of the Circular on periodic reports of CIUs.

The Board of Directors or Supervisory Board of the Islamic CIU, or its Management Company, shall annually evaluate the functioning of the Compliance Council. This evaluation is conducted using a collective and individual approach to the members and the President of the Council. An evaluation report is prepared for this purpose.

Article 12: Risk Management

An Islamic CIU must comply with the provisions regarding its organization as set out in the Circular on risk management of CIUs and must take into account Sharia non-compliance risk in its risk management policy.

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Article 13: Entry into Force

This Instruction shall enter into force as of its date of signature. It will be published where necessary.

Done in Abidjan, on February 20, 2023

For the Financial Markets Authority of the UMOA, The President

[Signature] Badanam PATOKI