Instruction No. 45/2011 on the Organization, Operation and Management of Collective Investment Schemes in Securities on the UMOA Regional Financial Market

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Union Monétaire Ouest Africaine crepmf Conseil Régional de l'Epargne Publique et des Marchés Financiers

INSTRUCTION N°45 / 2011
RELATIVE A L'ORGANISATION, AU FONCTIONNEMENT ET LA GESTION DES ORGANISMES DE PLACEMENT COLLECTIF EN VALEURS MOBILIERES SUR LE MARCHE FINANCIER REGIONAL DE L'UMOA

The Regional Council for Public Savings and Financial Markets,

Having regard to the Convention of 3 July 1996 establishing the Regional Council for Public Savings and Financial Markets (hereinafter "the Council");

Having regard to the Annex to the Convention on the composition, organization, operation and functions of the Council, particularly Article 18;

Having regard to the General Regulation on the Organization, Operation and Supervision of the UMOA Regional Financial Market, particularly Articles 72 et seq.;

Having regard to Regulation No. 9/2006/CM/UEMOA of the Council of Ministers dated 29 June 2006 adopting Specific Accounting Rules applicable to approved participants in the regional financial market,

Having regard to Decision No. CM/11/09/2009 dated 25 September 2009 by the UMOA Council of Ministers appointing the President of the Regional Council;

Having regard to the deliberations of the Regional Council at its session on 9 September 2011 held in Dakar, Senegal;

A R R E T E

TITRE 1 : DISPOSITIONS GENERALES RELATIVES AUX ORGANISMES DE PLACEMENT COLLECTIF EN VALEURS MOBILIERES

Article 1er : Définition

For the purposes of this Instruction, the following terms shall mean:

1. Collective Investment Schemes in Securities (OPCVM) : any savings product approved by the Regional Council for Public Savings and Financial Markets (CREPMF) and intended for retail and institutional investors within the framework of collective management.

2. Variable Capital Investment Companies (SICAV) : an OPCVM with legal personality (a company) that issues shares.

3. Common Investment Funds (FCP) : an OPCVM without legal personality that issues units/shares.

4. Management Company : a company ensuring, exclusively, the management of an OPCVM on behalf of unit or share holders.

5. Custodian : a Management and Intermediation Company (SGI) or an approved Bank acting as Account Keeper / Conservator (BTCC) responsible for the safekeeping of securities and the control of the regularity of management decisions taken on behalf of the OPCVM.

6. Related parties : a party is related to an entity in the following cases:

   a) directly or indirectly through one or more intermediaries, the party: i. controls the entity, is controlled by it, or is subject to joint control alongside the entity; ii. holds a participation in the entity enabling it to exercise significant influence over it; or iii. exercises joint control over the entity;

   b) the party is part of the senior management of the entity or its parent company.

7. Units : securities representing the rights of co-owners of an FCP, ownership resulting from registration on a list maintained by the management company; each unit corresponds to an equal fraction of the FCP's assets.

8. General Regulation : General Regulation on the Organization, Operation and Supervision of the Regional Financial Market.

Article 2 : Création

Management and Intermediation Companies (SGI), OPCVM Management Companies, banks, insurance companies, public limited companies, commercial public enterprises, employee groups and any other entity expressly authorized by the Council may establish an OPCVM.

The authorization must be obtained prior to the submission of the OPCVM approval application.

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Article 3 : Forme juridique

3.1 The FCP is a co-ownership of assets. The minimum amount of securities and cash deposits that any FCP must hold upon its establishment is set at one hundred million (100,000,000) FCFA. The value of securities contributed to the FCP's assets is verified by the Statutory Auditor, who establishes a report under their responsibility.

3.2 The SICAV is established with a minimum and fully paid-up capital of two hundred fifty million (250,000,000) FCFA, in the form of a public limited company governed by the provisions applicable to Public Offers to the Savings (APE) and those of the OHADA Uniform Act on Commercial Companies and GIEs.

3.3 The Management Company of an OPCVM must be established as a public limited company with a minimum and fully paid-up capital of fifty million (50,000,000) FCFA.

3.4 By way of derogation from the preceding paragraphs, Enterprise Common Investment Funds (FCPE) may be established with a minimum asset value of fifty million (50,000,000) FCFA, and Employee Share Ownership SICAVs (SICAVAS) with a minimum capital of one hundred fifty million (150,000,000) FCFA.

Article 4 : Demande d'agrément de la Société de Gestion

Management Companies must obtain approval from the Council before commencing their activities.

The application for approval must include the following:

• a letter of request;
• the company's articles of association;
• proof of completion of registration formalities with the Commercial and Movable Credit Register and legal incorporation;
• minutes of General Assemblies appointing the incumbent and alternate Directors and Statutory Auditors;
• minutes of the Board of Management appointing the incumbent Chairman of the Board and Chief Executive Officer;
• court records extracts dated less than three months old and curricula vitae of corporate officers and senior management showing their financial experience, other activities exercised notably with the custodian institution;

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• a presentation document containing the following information elements: o capital distribution, o financial situation of the last three years for each shareholder (legal entities) holding at least 10% of the company's share capital, o human resources allocated to the Management Company: * number and hierarchical level of persons holding management positions in the Management Company, as well as persons collaborating on OPCVM management who are not employees of the Management Company, indicating their respective organizations, * detailed organizational chart, * remuneration terms for employees and collaborators holding responsibilities, * code of ethics applicable to directors and staff; o Technical means: * list of equipment used by the Management Company, distinguishing proprietary equipment from jointly used equipment, * detailed description of portfolio management software functionalities and its operating manual, as well as planned data security measures;
• a business plan containing financial forecasts and projected financial statements for five years.

Article 5 : Approbation des OPCVM

The establishment, transformation, merger, demerger or liquidation of an OPCVM is subject to prior approval by the Council.

5.1 The application for OPCVM approval must include:

• a letter of request;
• the financial situation of the last three years for each promoter;
• the draft information note;
• the Custodianship Agreement;
• certified financial statements for the last three years of the Management Company and the Custodian;
• a five (05) year projection of the evolution in the number of securities and OPCVM assets;
• letters of commitment compliant with Articles 76 and 77 of the General Regulation.

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If it is an FCP, the file must also include:

• The Rules drafted jointly by the Management Company and the Custodian, with content specified by Council Instruction;
• The management mandate;
• Minutes of the Management Company's Board of Management appointing incumbent and alternate Statutory Auditors;

If it is a SICAV, the file must additionally include:

• Articles of association drafted in compliance with the General Regulation and OHADA Uniform Act on Commercial Companies and GIEs;
• Proof of completion of registration formalities with the Commercial and Movable Credit Register and legal incorporation;
• Minutes of General Assemblies appointing incumbent and alternate Directors and Statutory Auditors;
• Minutes of the SICAV's Board of Management appointing incumbent Chairman and CEO;
• Court records extracts dated less than three months old for corporate officers and senior management;
• The management mandate and minutes of the Management Company's Board appointing incumbent and alternate Statutory Auditors when SICAV management is delegated to a Management Company.

For self-managed SICAVs, curricula vitae of corporate officers and senior management showing financial experience and a presentation document containing the information elements defined in Article 4 must be attached to the approval application.

5.2 The transformation of an OPCVM, notably due to a change in category, requires new approval; until the new approval is granted, the OPCVM remains subject to all its initial commitments and guarantees provided to subscribers.

Any amendment to the articles of association of a SICAV or the rules of an FCP is subject to prior approval by the Council.

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5.3 The application for approval of any merger or demerger project concerning one or more OPCVMs, submitted by the Management Company or each concerned SICAV as applicable, is accompanied by a file including:

• Minutes of the Boards of Management of the concerned SICAVs or FCP Management Companies;
• A report on the implementation modalities of the operation;
• A Statutory Auditor's report for each OPCVM on the implementation modalities of the operation;
• Draft articles of association for SICAVs or rules for FCPs as they will be amended following the operation;
• Draft modified information notes of the OPCVMs.

OPCVMs resulting from a demerger must present the same characteristics as the initial OPCVM. Likewise, only OPCVMs with similar characteristics may merge.

Article 6 : Note d'Information

Prior to the issuance of shares or units, the OPCVM's information note must be visaed by the Council.

The content of this information note is specified by Council Instruction.

TITRE 2 : ORGANISATION DES OPCVM

Article 7 : Principe

The OPCVM or the company responsible for its management must permanently possess the organizational and human means necessary to exercise its activity. It must provide sufficient guarantees, particularly regarding its organization, technical and financial means, as well as the experience of its management.

Article 8 : Moyens organisationnels

8.1 The organizational chart of the OPCVM or management company must be detailed, showing activity managers and the company's hierarchical organization.

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8.2 The OPCVM or management company's organization must allow the exercise of activity in compliance with professional best practices.

It must be designed in particular to enable:

• the exercise of activities with diligence and impartiality exclusively in the interest of unit and share holders;
• the prevention of conflicts of interest;
• the autonomy of portfolio managers and the separation of businesses, particularly among different departments, specifying responsibilities, prerogatives and scope of action for each;
• the confidentiality of information regarding unit and share holders;
• the ability to trace securities transactions executed by the SICAV or Management Company regardless of the asset Custodian;
• transparency regarding transactions with related parties, notably ensuring appropriate publication.

8.3 The OPCVM or management company must establish and implement a procedures manual containing at minimum procedures related to:

• investment decision-making;
• processing securities purchase and sale transactions on markets;
• preparation of the cash position statement;
• processing securities purchase and sale transactions;
• management of OPCVM cash reserves;
• management of Management Company cash reserves;
• processing subscription and redemption transactions;
• preparation of reconciliations for cash, securities, and number of units or shares;
• inventory frequency;
• portfolio valuation;
• validation and publication of net asset value (NAV);
• rounding rules;
• allocation of block orders.

8.4 The OPCVM or management company must establish an Investment Committee composed of at least three persons possessing the required competence and experience for this function.

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Article 9 : Moyens humains

9.1 The OPCVM or management company must be directed by persons possessing the necessary integrity and competence, as well as experience suited to their functions.

At least one of these persons must be a corporate officer authorized to represent the company in its relations with third parties and exercising full-time activity within the company.

9.2 The OPCVM or management company must have collaborators whose skills are adapted to its activities and are regularly updated to follow market development.

The staff size of the OPCVM or management company must be compatible with its activity level (number of OPCVMs and managed volumes, notably) and development prospects.

9.3 The OPCVM or management company must have at minimum the following staff:

• a manager as defined by current regulations;
• a portfolio manager possessing the required skills to manage the assets under their charge;
• an internal controller. The latter must exercise functions independently of other functions and cannot hold other positions concurrently;
• a person assigned to administrative, IT and accounting management.

Administrative, IT and accounting management may be provided by external organizations upon authorization from the Regional Council. To this end, the OPCVM or Management Company submits service contracts with a presentation of providers, a description of tasks performed by them and the means to be deployed.

9.4 The portfolio manager function must be independent of other company functions, particularly those of the manager. A portfolio manager cannot manage more than three (3) funds.

9.5 The organization must be implemented to ensure service continuity even in the absence of the person responsible for the function. Thus, a replacement system must be provided for all indispensable functions listed in point 9.3 above.

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Article 10 : Locaux professionnels

10.1 The premises organization of the OPCVM or Management Company must be implemented to facilitate information transmission between its different departments.

10.2 The premises and technical means of the Management Company must be exclusively dedicated to it and cannot be shared with any other structure. Access must be secured. The offices of portfolio managers and the internal controller must be physically separated from other internal functions.

Article 11 : Moyens techniques

11.1 The different departments of the OPCVM or management company must be equipped with professional software or reliable dedicated applications useful for carrying out their activities.

11.2 The OPCVM or management company is required to carry out regular maintenance and renewal of equipment and IT applications to ensure their reliability and compatibility with regulatory requirements and market best practices.

11.3 The OPCVM or management company must have a backup system materialized by at least two servers. The second server must ensure regular backup of the first server's data.

TITRE 3 : FONCTIONNEMENT ET GESTION DES OPCVM

Article 12 : Gestion des OPCVM

A Management Company may manage any type of OPCVM.

A SICAV manages itself or may delegate its management to a Management Company approved by the Council.

Article 13 : Stratégie de placement

Every OPCVM is required to develop an investment strategy.

The investment strategy of an OPCVM is determined by its manager or promoters. It is described in the OPCVM's Rules and information note. This strategy defines how the OPCVM will be managed to meet the management objectives announced to investors.

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In particular, an investment strategy is defined by selecting a combination of key choices for managing the OPCVM's portfolio, subject to current regulatory provisions. Choices may relate in particular to the following parameters:

• a time horizon,
• a risk profile,
• weighting among different asset classes,
• a benchmark indicator,
• a sensitivity range,
• industry sectors,
• a guarantee or protection mechanism.

Article 14 : Comité d'Investissement

14.1 Every investment decision must be previously approved by the OPCVM's Investment Committee.

14.2 The Investment Committee must include at minimum:

• the Chief Executive Officer of the OPCVM or portfolio Management Company,
• the portfolio manager,
• an external person to the direct management of the OPCVM possessing the required competence and experience for this function.

The composition of the Investment Committee must be approved by the OPCVM's or Management Company's Board of Management.

14.3 Meetings of the Investment Committee must be ratified by minutes signed by all present members.

In case of written consultation or participation in a meeting via videoconference, this is mentioned in the minutes, to which obtained and confirmed written responses are attached.

Article 15 : Règles de gestion et de conservation des actifs

15.1 Every OPCVM must permanently respect the management rules corresponding to its category.

15.2 In addition to category-specific rules, every OPCVM must permanently respect the conditions defined by the Instruction on asset allocation rules and other conditions fixed in its Rules and information note regarding its investment strategy.

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15.3 OPCVM assets must be held by a unique Custodian, distinct from the OPCVM's Management Company. This Custodian must have its registered office in a Union State.

15.4 The OPCVM may delegate to the Custodian all or part of subscription and redemption management tasks, as well as liability management covering all account-keeping services, notably verifying the number of securities in circulation, dividend settlement, and creation and cancellation of securities following subscriptions and redemptions.

Article 16 : Exercice des droits attachés aux titres détenus par les OPCVM

The Management Company must exercise the rights attached to the securities included in the OPCVM it manages. The exercise of these rights is carried out in the interest of the unit or share holders of the OPCVM.

The Management Company reports on its activities related to the use of these rights in the annual report it sends to the OPCVM.

In exercising their voting rights, self-managed SICAVs are subject to the same obligations.

Article 17 : Rachat de titres

OPCVM securities are issued and redeemed at any time by the OPCVM or its Management Company upon request of unit or share holders at the net asset value (NAV), increased or decreased, as applicable, by fees and commissions.

The minimum asset level below which securities redemption cannot be processed is set at fifty million (50,000,000) FCFA for FCPs and one hundred twenty-five million (125,000,000) FCFA for SICAVs.

Redemption by the OPCVM, as well as the issuance of new securities, may be temporarily suspended when exceptional circumstances require it and if the interest of holders so dictates under conditions fixed by the articles of association or rules of the OPCVM.

The Council, informed in advance of any decision to suspend or defer redemption rights, may object.

Article 18 : Normes prudentielles

In compliance with the Specific Accounting Rules applicable to approved participants, OPCVMs and their Management Companies must permanently respect prudential standards defined by a Council Instruction.

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Article 19 : Commissaires aux comptes des OPCVM

The Board of Management of the SICAV or the Management Company (in the case of an FCP) appoints the Statutory Auditor following prior approval by the Council.

The provisions of Instruction No. 31/2005 on the exercise of Statutory Audit by approved structures and listed companies on the UMOA regional financial market apply to them.

Article 20 : Transmission d'informations du Conseil Régional

The OPCVM and/or Management Company transmit the following documents to the Council:

20.1 Within thirty (30) days following the date of holding the Ordinary General Assembly called to approve the financial statements for the fiscal year

• annual financial statements of the OPCVM and/or Management Company, prepared in compliance with the Specific Accounting Rules applicable to approved participants in the UMOA regional financial market and certified by the Statutory Auditor;
• certification reports from the Statutory Auditor prepared in compliance with Instruction No. 31/2005 on the exercise of Statutory Audit by approved structures and listed companies on the UMOA regional financial market;
• special reports from Statutory Auditors prepared in compliance with the OHADA Treaty Uniform Act on Commercial Companies and GIEs;
• minutes of Ordinary General Assemblies having respectively approved the financial statements of the Management Company and the SICAV;
• minutes