General Decision No. 6 of April 24, 2000 on Risk Rates for Stock Market Intermediaries

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General Decision No. 6 of April 24, 2000 in application of the Stock Market Intermediaries Statute 12 GENERAL DECISION OF THE FINANCIAL MARKET COUNCIL NO. 6 of April 24, 2000 on risk rates for the evaluation of risks incurred by stock market intermediaries by category of securities and type of market. The College of the Financial Market Council, meeting on March 2, 2000, Having regard to Law No. 94-117 of November 14, 1994 on the reorganization of the financial market and in particular Articles 28, 31, 48, 57 and 58 thereof; Having regard to Decree No. 99-2478 of November 1, 1999 on the statute of stock market intermediaries and in particular Article 87 thereof; Decides:

Article 1
The required net equity for risk coverage is obtained by applying, as applicable, to each security held in the portfolio of a stock market intermediary (as weighted according to Article 2 below), one of the following rates:
a) 10% for debt securities issued or guaranteed by the State or a local public authority; b) 20% for debt securities issued or guaranteed by a bank or public enterprise; c) 30% for debt securities whose issuer has obtained, from a rating agency recognized by the Financial Market Council, a generally satisfactory rating; d) 50% for equity securities admitted to the stock exchange listing or investment funds (OPCVM); e) 60% for:

• equity securities of companies or entities other than those referred to in point (d) and open to public investment;
• debt securities whose issuer has obtained, from a recognized rating agency, a generally unsatisfactory rating;
  f) 75% for:
• equity securities of companies not open to public investment;
• unguaranteed debt securities that have not been rated by a recognized rating agency.
  The required net equity for risk coverage must permanently and in all cases represent at least 30% of the value of the stock market intermediary's securities portfolio, as evaluated in accordance with Article 5 of this decision.

Article 2
For risk calculation, each security held in the portfolio of a stock market intermediary must be weighted by applying, as applicable, one of the following coefficients:
a) Coefficient 1 for:

• equity securities admitted to the stock exchange listing or investment funds (OPCVM) with a concentration below 20%;
• debt securities issued or guaranteed by the State or a local public authority;
• debt securities issued or guaranteed by a bank or public enterprise;
• debt securities whose issuer has obtained, from a recognized rating agency, a generally satisfactory rating;
  b) Coefficient 1.2 for equity securities admitted to the stock exchange listing or investment funds (OPCVM) with a concentration between 20% and below 50%; c) Coefficient 1.5 for:
• equity securities admitted to the stock exchange listing or investment funds (OPCVM) with a concentration between 50% and below 80%;
• unlisted equity securities with a concentration below 20%;
  d) Coefficient 2 for:
• equity securities admitted to the stock exchange listing or investment funds (OPCVM) with a concentration above 80%;
• unlisted equity securities with a concentration between 20% and 50%;
• debt securities whose issuer has not obtained, from a recognized rating agency, a generally satisfactory rating;
• unguaranteed debt securities that have not been rated by a recognized rating agency.
  e) Coefficient 2.5 for unlisted equity securities with a concentration between 50% and 80%; f) Coefficient 3 for unlisted equity securities with a concentration equal to or above 80%.

Concentration refers to the percentage represented by a security in the stock market intermediary's portfolio, evaluated in accordance with Article 5 of this general decision, relative to the total value constituting, as applicable:

• debt securities;
• equity securities of companies whose shares are admitted to the listing and investment funds (OPCVM);
• equity securities of companies open to public investment whose shares are not admitted to the listing;
• equity securities of companies not open to public investment.

Article 3
The net equity of a stock market intermediary taken into account under this general decision includes:

• Share capital;
• Reserves;
• Issuance, merger and contribution premiums;
• Revaluation reserves;
• Shareholders' current accounts;
• Retained earnings;
• The result of all securities transactions, not yet integrated into the period's result, determined daily;
  All reduced, where applicable:
• By the amount of subscribed but not yet called and/or not yet paid-up capital;
• By the value of investment and participation securities held in the capital of other stock market intermediaries, net of impairment provisions;
• By the value of investment and participation securities held in the capital of the stock market intermediary's shareholder companies, net of impairment provisions;
• By the value of net intangible assets and deferred charges;
• By the amounts of loans and advances to subsidiaries or staff;
• By contributions to guarantee funds.
  The stock market intermediary must calculate, after each trading day, the amount of its net equity and the required net equity for risk coverage, in accordance with Tables I and II attached to this general decision.

Article 4
Each stock market intermediary must send, by the fifth trading day following the end of each month, to the Financial Market Council:

• A statement of its net equity, prepared in accordance with Table I and finalized on the last business day of the relevant month;
• A summary statement of its securities portfolio composition, prepared in accordance with Table II and finalized on the last business day of the relevant month;
• A summary statement of its securities portfolio value, net equity value, and required net equity for risk coverage (calculated daily), prepared in accordance with Table III attached to this general decision.

Article 5
The accounting treatment of securities comprising the stock market intermediary's portfolio is carried out according to the recognition and evaluation methods for short-term investments, as provided by the current accounting legislation.

Article 6
This general decision shall be published in the Official Bulletin of the Financial Market Council after countersignature by the Minister of Finance. Tunis, April 24, 2000 Visa For the College of the Financial Market Council The Minister of Finance The President Taoufik BACCAR Béchir EL YOUNSI

TABLEAU I
Calculation of net equity for stock market intermediaries +/- Element amount (+) share capital (+) reserves (+) issuance, merger and contribution premiums (+) revaluation reserves (+) shareholders' current accounts (+/-) retained earnings (+/-) result of all securities transactions, not yet integrated into the period's result, determined daily; (-) amount of subscribed but not yet called and/or not yet paid-up capital (-) investment and participation securities held in the capital of other stock market intermediaries, net of impairment provisions (-) investment and participation securities held in the capital of the stock market intermediary's shareholder companies, net of impairment provisions (-) net intangible assets and deferred charges (-) loans and advances to subsidiaries or staff (-) contributions to guarantee funds Total net equity

Tableau II: Calculation of required net equity for risk coverage

Portfolio composition *	Counterparty securities	Market making securities	Guarantee/Good performance securities	Portfolio management securities	Total own-account securities	Security value	Portfolio value	% vs category	Weighting coefficient	Weighted portfolio value	Risk rate	Required net equity
Equity securities
Admitted to listing or OPCVM (Concentration < 20%)	100%	-	-	1	50%	Sub-total
Admitted to listing or OPCVM (Concentration 20%-50%)	-	-	-	1.2	50%	Sub-total
Admitted to listing or OPCVM (Concentration 50%-80%)	-	-	-	1.5	50%	Sub-total
Admitted to listing or OPCVM (Concentration > 80%)	-	-	-	2	50%	Sub-total
Companies open to public investment, unlisted (Concentration < 20%)	-	-	-	1.5	60%	Sub-total
Companies open to public investment, unlisted (Concentration 20%-50%)	-	-	-	2	60%	Sub-total
Companies open to public investment, unlisted (Concentration 50%-80%)	-	-	-	2.5	60%	Sub-total
Companies open to public investment, unlisted (Concentration > 80%)	-	-	-	3	60%	Sub-total
Companies not open to public investment (Concentration < 20%)	-	-	-	1.5	75%	Sub-total
Companies not open to public investment (Concentration 20%-50%)	-	-	-	2	75%	Sub-total
Companies not open to public investment (Concentration 50%-80%)	-	-	-	2.5	75%	Sub-total
Companies not open to public investment (Concentration > 80%)	-	-	-	3	75%	Sub-total
Debt securities (100%)
Issued by State/local authorities	1	-	-	10%	Sub-total
Guaranteed by State/local authorities	1	-	-	10%	Sub-total
Issued by bank/public enterprise	1	-	-	20%	Sub-total
Guaranteed by bank/public enterprise	1	-	-	20%	Sub-total
Rated generally satisfactory by recognized agency	1	-	-	20%	Sub-total
Rated generally unsatisfactory by recognized agency	2	-	-	30%	Sub-total
Unguaranteed, unrated by recognized agency	2	-	-	75%	Sub-total
Total required net equity for risk coverage

Tableau III
A summary statement of the portfolio value, net equity value, and required net equity for risk coverage, calculated daily. Reference month:

Trading day	Portfolio value	Required net equity (Table II)	Available net equity (Table I)