FRA Board Decision No. (39) of 2021

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FINANCIAL REGULATORY AUTHORITY

Chairman of the Authority

Board Decision No. (39) of 2021 dated 2021/3/21 Regarding the Regulations for Forming the Board of Directors of the Clearing and Settlement Company for Contracts Traded in Futures Exchanges, and the Conditions and Procedures for Nominating the Chairman and Board Members

Board of Directors of the Financial Regulatory Authority

Having reviewed the Capital Market Law issued by Law No. (95) of 1992; and the Central Depository and Registration of Securities and Financial Instruments Law issued by Law No. (93) of 2000; and Law No. (10) of 2009 regulating supervision over non-banking financial markets and instruments; and FRA Board Decision No. (95) of 2017 regarding measures taken by the Authority in case of violations by central depository and registration companies, and rules for applying these measures; and FRA Board Decision No. (100) of 2020 regarding corporate governance rules for companies operating in non-banking financial activities; and FRA Board Decision No. (126) of 2020 regarding ownership structure regulations for companies conducting central depository and registration activities for securities and financial instruments, and regulations for forming boards of directors of such companies; and FRA Board Decision No. (201) of 2020 regarding the ownership structure of the Futures Exchange Company and the Clearing and Settlement Company for Contracts Traded in the Futures Exchange; and after approval by the Authority's Board of Directors at its meeting held on 2021/3/21;

Decided

(Article One)
The Clearing and Settlement Company for Contracts Traded in Futures Exchanges shall comply with the following regulations when forming its Board of Directors:
1- The number of board members must not be less than five and not exceed nine, with the majority being experienced non-executives, provided that the composition includes at least two independent members.

[The term "independent director" refers to the definition in FRA Board Decision No. (100) of 2020 regarding corporate governance rules for companies operating in non-banking financial activities.]
2- The board term shall be three years.
3- The Chairman and executive board members may not serve on the board for more than three consecutive or separate terms.
4- The roles of Chairman and Managing Director/Chief Executive Officer may not be combined, subject to the application of Clause (1-1-3) of FRA Board Decision No. (100) of 2020 regarding corporate governance rules for companies operating in non-banking financial activities. 5- A company board member may not simultaneously hold a position on the board of another central depository and registration company. 6- The Company must use the cumulative voting method when electing board members. 7- The board composition must include at least one female member.

The following conditions must be met by candidates for the Chairman or board membership:
1- Possession of a suitable higher education qualification.
2- The required experience for the Chairman or Managing Director candidate in banking or non-banking finance must be at least ten years, and they must have previously held a supervisory position of an appropriate level in a banking or non-banking institution. 3- The experience required for board member candidates in the capital market or in legal, accounting, financial, or technical fields related to the Company's activities must be at least seven years. 4- Possession of professional competence, suitability, and necessary leadership qualities for board members. 5- Good reputation, with no prior final conviction for a felony or misdemeanor involving honor or trust, or serious crimes stipulated in laws regulating non-banking financial activities, the Central Bank and Banking Sector Law, or the Anti-Money Laundering Law, or a bankruptcy declaration within the preceding five years (unless reputation has been restored)(1). 6- The Authority must not have issued more than one sanction against the candidate during their board tenure (excluding warnings), due to a breach of duties or responsibilities as a board member, which disqualifies them from serving for the following two terms.

In all cases, the Company must take legally prescribed measures to exclude a board member if any of the conditions in the preceding clauses are met.

(Article Two)
Candidacy requests for the Chairman and board membership shall be submitted to the Company, accompanied by supporting documents demonstrating compliance with the required conditions as outlined in this Decision.

The Company shall prepare three lists of candidates as follows:
(a) List of candidates for the Chairman.
(b) List of experienced candidates eligible to hold the Managing Director position.
(c) List of experienced candidates not eligible to hold the Managing Director position.

(Article Three)
A committee formed by the Chairman of the Authority shall be responsible for examining and evaluating candidacy requests for the Chairman and board membership.
The Committee shall review candidate names, verify that required conditions are met, and correspond with the Company to obtain documents related to candidates in accordance with the prescribed conditions and standards.

(Article Four)
The Committee shall convene upon invitation by its Chairman, with a quorum requiring the attendance of a majority of its members. The Committee shall issue recommendations by a majority of attending members, and prepare a reasoned report detailing the final status, including results, proposed recommendations, and findings on whether legal conditions are met for each candidate, as well as reasons for excluding those who fail to meet candidacy requirements. The report shall be submitted to the Chairman of the Authority for approval prior to being presented to the Board of Directors for ratification.

Following the Authority's Board approval, the Company shall present the candidate lists as referenced in Article Two to the Company's General Assembly for voting. The validity of voting is subject to the following:
1- Selection of a candidate from the list referenced in Clause (a).
2- Selection of at least one candidate from the list referenced in Clause (b), with remaining members selected based on the highest votes received by candidates from either lists (b) or (c).

(Article Five)
Interested parties may appeal the Authority's Board Decision approving candidate names and lists, as well as the board election results, within five working days from the date of notification or knowledge of the decision, before the Authority's Appeals Committee in accordance with Article (53) of the Central Depository and Registration of Securities and Financial Instruments Law.

The Appeals Committee shall rule on the appeal within a period not exceeding two weeks from the expiry of the appeal period. Its decision shall be final and executable, and interested parties shall be notified within one working day at most from the date of issuance.

(Article Six)
The candidacy examination committee referenced in Article Three shall finalize the lists of candidate names within two working days following the date of the Appeals Committee's decision (if any) or from the expiry of the appeal period, whichever applies.

(Article Seven)
FRA Board Decision No. (95) of 2017 regarding measures taken by the Authority in case of violations by central depository and registration companies, and rules for applying these measures, shall apply to the Clearing and Settlement Company for Contracts Traded in Futures Exchanges.

(Article Eight)
This Decision shall be published in Al-Waqa'ieh Al-Masriyah (the Egyptian Gazette) and on the Authority's official website, and shall take effect from the day following its publication in Al-Waqa'ieh Al-Masriyah. All provisions conflicting with this Decision are hereby repealed.

Chairman of the Board of Directors
Dr. Mohamed Omran

(1) The term "serious crimes" in the application of this Decision refers to crimes punishable by imprisonment or fines with a maximum penalty not less than that stipulated in laws regulating non-banking financial activities, the Central Bank and Banking Sector Law, or the Anti-Money Laundering Law.

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