Instruction No. 46/2011 (Revised) on the Classification and Asset Allocation Rules for Collective Investment Schemes on the UMOA Regional Financial Market

WEST AFRICAN MONETARY UNION

crepmf

REGIONAL COUNCIL FOR PUBLIC SAVINGS AND FINANCIAL MARKETS

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INSTRUCTION NO. 46 / 2011 (REVISED)

RELATING TO THE CLASSIFICATION AND ASSET ALLOCATION RULES FOR COLLECTIVE INVESTMENT SCHEMES ON THE UMOA REGIONAL FINANCIAL MARKET

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The Regional Council for Public Savings and Financial Markets,

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

Having regard to the Annex to the Convention on the composition, organization, functioning and powers of the Regional Council, particularly Article 18;

Having regard to the General Regulation on the Organization, Functioning and Control of the UMOA Regional Financial Market, particularly Articles 72 and following;

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

Having regard to Regulation No. 02/2010/CM/UEMOA relating to securitization operations within the UEMOA;

Having regard to Decision No. CM/DAC/04/04/2017 of April 14, 2017 of the UMOA Council of Ministers appointing the President of the Regional Council;

Having regard to the deliberations of the Regional Council during the 48th ordinary session of September 9, 2011;

Having regard to the deliberations of the Regional Council during the 51st ordinary session of September 4, 2012;

Having regard to the deliberations of the Regional Council during the 75th ordinary session of June 5, 2018;

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Instruction No. 46/ 2011 (REVISED)

A R R E S T S

TITLE I: DEFINITION OF TYPES OF COLLECTIVE INVESTMENT SCHEMES

Article 1

Collective Investment Schemes ("CIS") are:

1. Collective Investment Schemes in Securities (hereinafter designated by the acronym "CIS in Securities" or "OPCVM");
2. Securitization Funds of Claims (hereinafter designated by the acronym "Securitization Funds" or "FCTC").

CIS in Securities take the form of Variable Capital Investment Companies, Common Investment Funds or any other collective investment vehicle approved by the Regional Council.

CHAPTER I: VARIABLE CAPITAL INVESTMENT COMPANIES

Article 2

A Variable Capital Investment Company (SICAV) is a public limited company whose exclusive purpose is the formation and management of a portfolio of securities.

Article 3

Venture Capital Investment Companies (SICAR) are SICAVs whose main purpose is participation, on behalf of their shareholders and with a view to their subsequent sale, particularly on the regional financial market, in the capital or strengthening of the equity of companies.

SICARs aim to enable their shareholders to benefit from the results of the management of the assets they hold in exchange for the risk they bear.

When the shares held by a SICAR are admitted to the Regional Securities Exchange (BRVM), the latter may only retain them for a maximum period of two (2) years from the date of admission.

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Instruction No. 46/ 2011 (REVISED)

CHAPTER II: COMMON INVESTMENT FUNDS (FCP)

Article 4

A Common Investment Fund (FCP) is a co-ownership of securities. By purchasing shares, the investor becomes a member of a co-ownership of securities but has no voting rights. They are not a shareholder.

The provisions relating to indivision and companies are not applicable to it.

FCPs are represented by a Management Company in all acts concerning the rights and obligations of share holders as well as in any legal action, whether as plaintiff or defendant.

Article 5

Venture Capital Common Investment Funds (FCPR) are FCPs whose main purpose is participation, on behalf of share holders and with a view to their subsequent sale, in the capital or strengthening of the equity of companies.

Article 6

Corporate Common Investment Funds (FCPE) are FCPs reserved for employees of a company or a group of companies.

Article 7

7.1 Any Common Investment Fund that comes to hold assets exceeding five (05) billion FCFA must put in place the following control and surveillance mechanism:
7.1.1 A Surveillance Committee
The Surveillance Committee must be composed of five (05) members including:

• one (01) President, a natural person having no link with the Management Company and the Depositary of the Fund;
• one (01) natural person and independent of any link with the GSC or with the FCPs under management and their depositary, from whom the President of the Committee will be chosen;
• three (03) share holders of the Common Investment Fund and having no link with the Management Company and the Depositary of the Fund.

The Surveillance Committee:

• exercises permanent control of the management provided by the Management Company;

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Instruction No. 46/ 2011 (REVISED)

• ensures that the CIS in Securities in excess respects the current regulations globally and particularly those relating to investment and asset allocation rules;
• transmits to the Regional Council, quarterly, a detailed report on its missions.

7.1.2 An Internal Control Reporting Mechanism
The Internal Controller of the Management Company must transmit monthly to the CREPMF (no later than the 5th of each following month), a report on the evolution of the activity of the GSC and its Funds under management, on the one hand, and on the respect of investment and asset allocation rules, on the other hand.

It must ensure that the recommendations resulting from its controls are implemented within the allotted time and that the GSC does not take any decision that would have the consequence of aggravating the breaches found.

7.1.3 A Depositary Reporting Mechanism for the FCP
The Depositary of the FCP must transmit quarterly to the CREPMF (no later than the 15th of the month following the end of the quarter), a report on the movement of flows of the CIS in Securities as well as on the control of the respect of management rules.

In the event that an operation appears irregular to the Depositary, the Depositary must request its regularization, and take all conservatory measures it deems useful. It must, without delay, inform the CREPMF.

7.2 The maximum assets that a Common Investment Fund can hold is set at twenty-five (25) billion FCFA.

Any FCP that comes to hold assets exceeding twenty-five (25) billion FCFA must declare it, without delay, to the Regional Council.

No FCP may hold, during (06) consecutive months, assets exceeding twenty-five (25) billion FCFA, in which case the FCP must, within a period of six (6) months, transform into a SICAV or proceed to a split.

7.3 The provisions of paragraph 7.2 above do not apply to Corporate Common Investment Funds, Common Investment Funds dedicated solely to subsidiaries of a group of Companies, Venture Capital Common Investment Funds and "contractual" Common Investment Funds.

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Instruction No. 46/ 2011 (REVISED)

TITLE II: CLASSIFICATION OF CIS IN SECURITIES

Article 8

CIS in Securities are classified according to the following categories: "equity" CIS in Securities, "short-term debt" CIS in Securities, "medium and long-term debt" CIS in Securities, "contractual" CIS in Securities and "diversified" CIS in Securities.

Article 9

An "equity" CIS in Securities permanently meets one of the following criteria:

9.1 Be invested to the extent of at least 70% of its assets, excluding "equity" CIS in Securities titles, in shares, and subscription or allotment rights, listed on the BRVM or on any other regulated market operating regularly and open to the public within the UEMOA.

9.2 Be invested to the extent of at least 90% of its assets in "equity" CIS in Securities titles excluding cash.

Article 10

A "short-term debt" CIS in Securities permanently meets one of the following criteria:

10.1 Be invested to the extent of at least 70% of its assets, excluding "short-term debt" CIS in Securities titles or Securitization Fund titles, in:

• bond issues that have been subject to public offering within the Union whose remaining life does not exceed two years;
• bills, treasury bonds assimilable and bond issues guaranteed by a State of the Union whose remaining life does not exceed two years;
• securities representing short-term debt titles issued by the States of the Union;
• securities representing short-term titles issued on the regional money market.

10.2 Be invested in a proportion of at least 90% of its assets, excluding cash, in "short-term debt" CIS in Securities titles or Securitization Fund titles.

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Instruction No. 46/ 2011 (REVISED)

Article 11

A "medium and long-term debt" CIS in Securities permanently meets one of the following criteria:

11.1 Be invested to the extent of at least 90% of its assets, excluding "medium and long-term debt" CIS in Securities titles and cash, in:

• bond issues that have been subject to public offering or private placement within the Union whose remaining life exceeds two years;
• treasury bonds assimilable and bond issues guaranteed by the States of the Union whose remaining life exceeds two years;
• securities representing medium and long-term debt titles issued by the States of the Union;
• securities representing medium and long-term titles issued on the money market.

11.2 Be invested in a proportion of 90%, excluding cash, of "medium and long-term debt" CIS in Securities titles or Securitization Fund titles.

Article 12

12.1 A "contractual CIS in Securities" is the CIS in Securities whose commitment of the management company of the FCP or the SICAV, as the case may be, contractually bears on a concrete result expressed in terms of performance and/or guarantee in amount invested by the subscriber. In exchange for this guarantee, the Management Company of the FCP or the SICAV may require from the subscriber, commitments relating to the amount invested and/or the duration of holding of the CIS in Securities titles.

12.2 Commitments on the amount invested or on the duration of holding of the CIS in Securities titles can be formalized in different ways which must, if necessary, be presented in the various constitutive documents of the CIS in Securities approval file.

Article 13

13.1 A "diversified CIS in Securities" is the CIS in Securities that is neither an "equity" CIS in Securities, nor a "short-term debt" CIS in Securities, nor a "medium and long-term debt" CIS in Securities, nor a "contractual" CIS in Securities.

13.2 A "diversified CIS in Securities" may at no time be invested to the extent of more than 70% in shares and/or assimilables, nor be invested to the extent of more than 70% in short-term or medium and long-term debt, in debt titles issued on the money market, in titles of other CIS in Securities or Securitization Funds.

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Instruction No. 46/ 2011 (REVISED)

TITLE III: ASSET ALLOCATION RULES

Article 14

The assets managed by CIS in Securities must be constituted, under the conditions defined by their Regulations, of:

• securities issued, in the UMOA, by public offering or private placement and/or admitted to the listing of the Regional Securities Exchange or any regulated market authorized by the Regional Council;

• treasury bills and bonds and debt titles issued on the UMOA money market;

• shares and debt titles of CIS issued in the UMOA.

CIS in Securities may include current holdings placed short-term or on demand.

Other investments than those mentioned in the preceding paragraph are subject to prior authorization from the Regional Council. The percentage of these investments may in no case exceed the limit of 15% of the assets of the CIS in Securities.

Article 15

The provisions of Article 14 above do not apply to FCPRs, nor to SICARs whose assets can be invested in unlisted titles or serve as advances in the form of shareholder current accounts.

Due to the risky nature of the investment, only qualified investors are authorized to take a participation in such CIS in Securities. Banks, financial institutions, Intermediation Management Companies, Wealth Management Companies acting for their own account, insurance and reinsurance companies, insurance group companies, mutuals and unions of mutuals, provident institutions, deposit, amortization or stabilization funds, fixed capital investment companies or venture capital companies and alternative management funds are considered by right as qualified investors.

Other qualified investors are registered on a list approved by the Regional Council.

Article 16

No CIS in Securities may employ more than 15% of its assets in securities issued by the same issuer, unless it concerns securities issued or guaranteed by States of the UMOA.

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Instruction No. 46/ 2011 (REVISED)

In the case of securities issued or guaranteed by the States of the Union, the above ceiling may be raised to 25%.

The previous ratio may also reach 20% for listed capital titles whose weighting in the reference stock index, as calculated by the BRVM, exceeds 10%.

The ratio between the total value of capital titles that a CIS in Securities holds with issuers in each of which it invests more than 15% and its net asset value may in no case exceed 45%.

Article 17

The provisions of Article 16 above do not apply to the FCPE whose assets must be constituted permanently and to the extent of at least 20%, by shares of the company or group of companies that employs the share holders if its titles are listed and 30% otherwise.

Article 18

The liquidity that can be included in the assets of a CIS in Securities may not exceed a ceiling of 20% of its assets.

Article 19

Any breach of the asset allocation rules defined above during a consecutive period of one month must be declared, without delay, to the Regional Council.

In any case, any excess of ratios must be regularized within a maximum period of two (2) months. Before any regulation, the Depositary ensures that no investment decision has the effect of transactions likely to aggravate the breach.

TITLE IV: TRANSITIONAL AND FINAL PROVISIONS

Article 20

CIS in Securities approved before the publication of this instruction have, from the date of this publication, a period of six (06) months to comply with the provisions of said decision.

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Instruction No. 46/ 2011 (REVISED)

Article 21

This instruction, which repeals all previous contrary provisions, takes effect from the date of its signature. It will be published wherever necessary.

Done in Abidjan, on July 30, 2018

The President,
Mamadou NDIAYE