Guidelines on Preventing Criminal Acquisition of Majority Shareholdings in Listed or Publicly Offered Companies

GUIDELINES
PREVENTION AGAINST CRIMINAL ACQUISITION OF MAJORITY SHAREHOLDINGS IN THE CAPITAL OF COMPANIES WHOSE SECURITIES ARE LISTED ON THE STOCK EXCHANGE OR ARE THE SUBJECT OF A PUBLIC OFFER OF SECURITIES Published on: June 20, 2024

1. Introduction
   These guidelines aim to raise awareness among companies whose securities are listed on the stock exchange or are the subject of a public offer regarding the risks related to money laundering and the financing of terrorism, with the aim of maintaining the integrity of the financial market. These guidelines also aim to raise awareness among these companies to take the necessary diligence and verification measures to prevent the acquisition of majority shareholdings in their capital by individuals or entities involved in criminal or fraudulent activities.

2. Applicable Legal and Regulatory Framework
   2.1. National Legal and Regulatory Framework

• Legislative Decree 93-10 of May 23, 1993, modified and supplemented, relating to the securities market;
• Law No. 05-01 of February 6, 2005, modified and supplemented, relating to the prevention and fight against money laundering and the financing of terrorism;
• Law No. 06-01 of February 20, 2006, modified and supplemented, relating to the prevention and fight against corruption;
• Law No. 18-07 of June 10, 2018, relating to the protection of natural persons in the processing of personal data;
• Executive Decree No. 21-384 of October 7, 2021, setting the procedures for inscription and removal from the national list of terrorist persons and entities and the consequences arising therefrom;
• Executive Decree No. 02-127 of April 7, 2002, establishing, organizing, and operating the Financial Intelligence Processing Unit (CTRF);
• Executive Decree No. 23-428 of November 29, 2023, relating to the procedure for freezing and/or seizing funds and assets in the context of the prevention and fight against the financing of terrorism and the financing of the proliferation of weapons of mass destruction;
• Executive Decree No. 23-430 of November 29, 2023, setting the conditions and procedures for the exercise by regulatory, control, and/or supervisory authorities of their missions in the field of prevention and fight against money laundering, the financing of terrorism, and the financing of the proliferation of weapons of mass destruction, with regard to obligated entities;
• Order of February 6, 2022, inscribing persons and entities on the national terrorist list.
• COSOB Regulation No. 97-04 of November 25, 1997, relating to collective investment schemes in securities (OPCVM);
• COSOB Regulation No. 96-02 of June 22, 1996, relating to information to be published by companies raising capital during the issuance of securities;
• COSOB Regulation No. 2000-02 of January 20, 2000, relating to information to be published by companies whose securities are listed on the stock exchange.

2.2. International Legal and Regulatory Framework

• Standards issued by the Financial Action Task Force (FATF);
• Resolutions of the UN Security Council, notably Resolutions No. 1267, 1989, and 2253;
• Lists of the UN Security Council Committee established pursuant to Resolutions No. 1267, 1989, and 2253, containing targeted financial sanctions lists.

3. Enhanced Due Diligence Process
   Companies whose securities are listed on the stock exchange or are the subject of a public offer, hereinafter referred to as "regulated companies," should implement enhanced due diligence processes for any potential new shareholder seeking to acquire a significant stake (at least 5% of the capital or voting rights) in the company and in the context of declarations of crossing regulatory thresholds (5%, 10%, etc.) of the capital or voting rights, as well as for members of the board of directors and senior management. This enhanced due diligence process should include investigations into their criminal records and financial reputation.

4. Verification of Significant Shareholders' Backgrounds
   These verifications could include collecting information on the identity of the potential shareholder, their professional and financial background, in-depth investigations into any potential criminal records or links with illicit activities of criminal entities or illegal organizations, as well as thorough examinations of funding sources. Regulated companies must consult the national list of terrorist entities and the international list of targeted financial sanctions for any potential new shareholder seeking to acquire a significant stake, as well as for members of the board of directors and senior management. This information must be verified when a potential shareholder acquires a significant stake or crosses one of the regulatory thresholds, and regularly on the CTRF website, the Ministry of Foreign Affairs website, and the United Nations website. Regulated companies should implement internal policies on the fight against money laundering and the financing of terrorism. These internal policies should require shareholders who have acquired a significant stake or crossed one of the regulatory thresholds to provide declarations on the identity of the beneficial owner and on the origin of the funds used to acquire their shares, to ensure they do not originate from criminal activities.

5. Verification of the Origin of Funds and Beneficial Owner
   Regulated companies must ensure they are not used for money laundering. To this end, regulated companies should:

• Have a compliance and risk management structure capable of conducting initial verifications on the sources of funds used to acquire a significant share and collaborate with external experts if necessary;
• Keep records of their shareholders, including those holding significant stakes, and equip themselves, if necessary, with technological tools to detect, track, and analyze significant transactions quickly;
• Collaborate with stock exchange intermediaries, custodian-depositories, and, if necessary, with specialized audit and consulting firms and compliance service providers to verify the identity of the beneficial owner and the origin of the funds;
• Implement strict internal control policies to ensure that all transactions comply with regulations and that the origin of funds of new significant shareholders is adequately verified.

6. Verification of Persons Holding Management Positions
   In addition to verifying the backgrounds of potential shareholders, it is also essential to conduct rigorous verifications on persons holding management positions in regulated companies.
   Regulated companies should conduct in-depth verifications of the professional and criminal backgrounds of executives, including members of the board of directors, general managers, and executives with signing power that can financially commit regulated companies.
   These verifications could include investigations into professional backgrounds, reference checks, credit checks, criminal background checks, and in-depth investigations into potential conflicts of interest or links with criminal activities.

7. Collaboration with COSOB
   In the context of enhanced verifications, COSOB can provide advice and expertise to regulated companies on how to conduct professional and financial background checks. COSOB's advice covers best practices in background verification, sources of information to consult, and procedures to follow to ensure the effectiveness and accuracy of verifications. COSOB can also use its cooperation channels with other national control and supervisory authorities to access specialized databases and confidential information that could help verify the backgrounds of potential shareholders and persons holding management positions. COSOB can, if necessary, use its international cooperation channels, notably the Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (MMOU) with its foreign counterparts, established by the International Organization of Securities Commissions (IOSCO), to complement the enhanced verifications implemented by regulated companies.

8. Transaction Transparency
   Regulated companies must ensure that significant transactions involving majority shareholdings are transparent and, where applicable, approved by COSOB.
   In this regard, they are required to disclose all relevant information they hold concerning acquisition transactions, including the parties involved, financial amounts, and the motivations behind the acquisition.

9. Suspicious Transaction Reporting
   Regulated companies should establish a suspicious activity reporting mechanism to exchange with COSOB and the CTRF information collected on individuals or entities suspected of being involved in criminal or fraudulent activities. This measure will contribute to strengthening the capacity of these two authorities to prevent the acquisition, by criminals, of majority shareholdings in companies whose securities are listed on the stock exchange or are the subject of a public offer of securities.

10. Staff Awareness and Training
    Regulated companies should implement awareness and training programs for their employees to help them recognize signs of fraudulent or malicious acquisition attempts.