Regulation of the Financial Market Council on Collective Investment Undertakings in Securities and Portfolio Management for Third Parties

Annex to the Order of the Minister of Finance approving the Regulation of the Financial Market Council regarding Collective Investment Undertakings in Securities and Portfolio Management for Third Parties
The Financial Market Council;
Having regard to Law No. 94-117 of November 14, 1994 on the reorganization of the financial market as amended and supplemented by subsequent texts, particularly Law No. 2009-64 of August 12, 2009 promulgating the Code on Financial Services Provision to Non-Residents and particularly its Articles 29 and 31; Having regard to the Code on Collective Investment Undertakings promulgated by Law No. 2001-83 of July 24, 2001 as amended and supplemented by subsequent texts, particularly Law No. 2008-78 of December 22, 2008 modifying legislation on venture capital companies and risk mutual funds and extending their scope of intervention, particularly its Article 31; Having regard to Law No. 2005-96 of October 18, 2005 on strengthening the security of financial relations and particularly its Article 20; Having regard to Decree No. 2001–2278 of September 25, 2001 implementing the provisions of Articles 15, 29, 35, 36 and 37 of the Code on Collective Investment Undertakings promulgated by Law No. 2001-83 of July 24, 2001 as amended and supplemented by subsequent texts, particularly Decree No. 2006-1248 of May 2, 2006; Having regard to Decree No. 2006-1294 of May 8, 2006 implementing the provisions of Article 23 of Law No. 2005-96 of October 18, 2005 on strengthening the security of financial relations as amended by Decree No. 2009-1502 of May 18, 2009 and particularly its Articles 2, 6 and 6 ter; Having regard to the Order of the Minister of Finance of January 29, 2002 approving the Regulation of the Financial Market Council regarding Collective Investment Undertakings in Securities and management companies for these undertakings, and the modifications introduced therein and approved by the Order of the Minister of Finance of January 28, 2007; Decides:

REGULATION OF THE FINANCIAL MARKET COUNCIL REGARDING COLLECTIVE INVESTMENT UNDERTAKINGS IN SECURITIES AND PORTFOLIO MANAGEMENT FOR THIRD PARTIES1 PREAMBLE General Provisions
Article 1:
The provisions of this Regulation apply to:

• collective investment undertakings in securities hereinafter referred to as CIUS;
• management companies provided for in Article 31 of the Code on Collective Investment Undertakings promulgated by Law No. 2001-83 of July 24, 2001 cited above;
• management companies provided for in Article 20 of Law No. 2005-96 of October 18, 2005 on strengthening the security of financial relations;
• stock exchange intermediaries and credit institutions authorized to manage securities portfolios for third parties in accordance with Article 22 of Law No. 2005-96 of October 18, 2005 on strengthening the security of financial relations;
• depositaries;
• stock exchange intermediaries and persons who, due to their professional activity, intervene in accounting control or legal or financial structuring operations on securities or financial products placed through a public offering;
• persons responsible for issuing opinions on information intended for the public;
• the securities depository, clearing and settlement company;
• the Tunis Stock Exchange;
• investors in securities and financial products;
• distributors of CIUS shares/units;
• statutory auditors of CIUS.

Article 2:
Collective Investment Undertakings in Securities hereinafter referred to as CIUS are variable capital investment companies hereinafter called SICAV and mutual funds hereinafter called FCP.

Article 3:
For the purposes of this Regulation, "manager" means:

• management companies provided for in Article 31 of the Code on Collective Investment Undertakings promulgated by Law No. 2001-83 cited above and in Article 20 of Law No. 2005-96 cited above;
• and stock exchange intermediaries and credit institutions authorized to manage securities portfolios for third parties in accordance with Article 22 of Law No. 2005-96 cited above.

TITLE I: COLLECTIVE INVESTMENT UNDERTAKINGS IN SECURITIES
CHAPTER I
Establishment of CIUS
Section 1: Approval and establishment of CIUS
Article 4:
The approval file for a CIUS submitted to the Financial Market Council includes the following documents:

• an approval form (Annex No. 1); it contains the identification of the CIUS and its stakeholders, the concerned investors, management characteristics, and operational procedures;
• draft statutes for the SICAV or internal regulations for the FCP (Annex No. 2);
• information concerning the CIUS manager: its organizational chart and that of its functional and operational structures, job descriptions, delegation of powers and responsibilities within the management department, procedures describing the process for various operations including computerized processing procedures, identifying necessary controls at each stage within this department, and a presentation of its shareholding;
• information concerning the depositary institution: its organizational chart and that of its functional and operational structures, job descriptions, delegation of powers and responsibilities within the depositary department, procedures describing the process for various operations including computerized processing procedures, identifying necessary controls at each stage within this department, the acceptance letter, and the control plan;
• information concerning the distributor(s): its organizational chart and that of its functional and operational structures, job descriptions, delegation of powers and responsibilities within the distribution department, as well as distribution terms;
• identification sheets for founders specifying in particular their curriculum vitae and, for natural persons, an extract from their criminal record, and for legal entities, a general description of their activities and presentation, where applicable, the group to which they belong, as well as shareholding structure;
• a general description of remuneration terms for employees, executives, managers, depositaries, and distributors of the CIUS;
• a list of initial shareholders or unit holders indicating the amount of contributions to be made by each;
• identification of the stock exchange intermediary(ies) responsible for executing the manager's orders on the exchange, as well as their remuneration.
  The Financial Market Council processes the approval request within a maximum period of three months from the date of submission accompanied by the necessary documents. This period is suspended until receipt by the Financial Market Council of additional information or actions requested.

Section 2: Public Offering
Article 5:
The public offering made by a CIUS is subject to notification of its approval by the Financial Market Council.
The CIUS may not receive public subscriptions until a prospectus has been established, according to the model presented in Annex No. 3, submitted for visa by the Financial Market Council in accordance with Article 2 of Law No. 94-117 and the provisions of the Financial Market Council's Regulation on public offerings.

Article 6:
The prospectus must contain the following statement:
"This document contains important information and should be read carefully before subscribing to any investment."

Article 7:
Prior to any subscription, the CIUS publishes a prospectus approved by the Financial Market Council. It must be made available to the public and delivered prior to any subscription.
Investors may obtain communication from the SICAV or management company.
Furthermore, investors may obtain free of charge communication of the SICAV statutes or FCP internal regulations.

Article 8:
The dissemination and advertising of the prospectus are conducted under the same conditions as those provided by the Financial Market Council's Regulation on public offerings.
Advertising related to securities placement must meet the requirements of the Financial Market Council's Regulation on public offerings.

Article 9:
FCP founders undertake to complete, where applicable, the subscription to reach the minimum legal amount. They must inform the Financial Market Council of the new structure of unit holders.
The FCP is established on the date of fund deposit.

Article 10:
A certificate of fund deposit for FCP or a certificate of initial capital deposit for SICAV must be sent to the Financial Market Council by the depositary immediately after fund deposit.

Article 11:
Without prejudice to the provisions of Article 164 of the Commercial Companies Code, the CIUS is required to insert in the Official Journal of the Tunisian Republic a notice containing the approval date, the public offering opening date, the name and registered office of the establishment where the CIUS portfolio and funds will be deposited, as well as the name and registered office of the manager and distributor.

CHAPTER II
Changes in CIUS Life
Section 1: Liquidation of CIUS
Article 12:
Without prejudice to the provisions of the Commercial Companies Code regarding liquidation, the approval file for liquidation is submitted to the Financial Market Council accompanied by the following documents:

• a liquidation form (Annex No. 4);
• the project(s) for information to shareholders or unit holders;
• written indication from the depositary that it has been informed of the liquidation;
• a copy of the minutes of the board of directors or management board of the manager or SICAV;
• a copy of the extraordinary general meeting minutes for SICAV;
• the statutory auditor's report.
  The Financial Market Council processes the approval request within a maximum period of three months from the date of submission accompanied by the necessary documents. This period is suspended until receipt by the Financial Market Council of additional information or actions requested.

Article 13:
Liquidation conditions and asset distribution methods are determined by the SICAV statutes or FCP internal regulations.
During the liquidation period, the CIUS remains subject to Financial Market Council control and may only carry out operations strictly necessary for its liquidation.
The CIUS may only state its status as SICAV or FCP by specifying that it is in liquidation.

Article 14:
Upon liquidation of a CIUS, the liquidator evaluates the asset amount and prepares a report on liquidation conditions no later than one month after appointment. This report is made available to shareholders or unit holders. It is also transmitted without delay to the Financial Market Council.

Article 15:
The liquidator must submit to the Financial Market Council a report on the evolution of liquidation operations once every three months, and upon completion of its mission, a detailed report on the liquidation.
The liquidator's report is transmitted to the Financial Market Council no later than one month after its establishment.

Article 16:
Upon obtaining approval regarding liquidation, the CIUS responsible immediately informs its subscribers by individual letter and the public by publishing a press release in two daily newspapers (one in Arabic) and in the Financial Market Council's official bulletin. The information must necessarily mention the effective date.

Section 2: Change of one of the characteristic elements of the approval file
Article 17:
Any modification affecting the characteristic elements of the initial CIUS approval file must be brought to the attention of the Financial Market Council.
The Financial Market Council assesses whether these modifications are likely to invalidate the granted approval or require information to shareholders or unit holders, and determines the communication medium.

Article 18:
The modifications provided for in Article 17 are brought to the attention of shareholders and unit holders by the manager through press release in a daily newspaper and publication in the Financial Market Council's official bulletin. They open to subscribers the possibility of exit without fees. These exit terms must be explicitly mentioned when informing subscribers. Redemption requests are processed for three months from the moment the shareholder or unit holder was informed of the change. Redemptions are made exclusively in cash. This information must be clear to enable unit holders or shareholders to make an informed decision.

CHAPTER III
SPECIFIC RULES FOR VENTURE CAPITAL FUNDS AND RISK MUTUAL FUNDS
Section 1: General Provisions
Article 19:
In accordance with Article 1 of Law No. 2005-58 of July 18, 2005, venture capital funds are securities mutual funds aimed at strengthening the equity of innovative projects before the effective startup phase.
These funds primarily assist promoters in:

• exploiting invention patents;
• completing the technical and economic study of the project;
• developing the product's technological process before the commercialization phase;
• completing the financing scheme.

Article 20 (new) (Order of the Minister of Finance of February 15, 2013, Art. 1):
In accordance with Article 22 bis of the Code on Collective Investment Undertakings, risk mutual funds are securities mutual funds aimed at participating, for the benefit of unit holders and with a view to their transfer or sale, in strengthening investment opportunities and company equity. Risk mutual funds must, within a period not exceeding the end of the second year following the year in which shares were paid up, employ at least 80% of their assets in Tunisian-established and non-listed companies on the Tunis Stock Exchange, except those operating in the housing real estate sector. Newly issued shares on the alternative market of the Tunis Stock Exchange are also taken into account for calculating the employment rate provided in the first paragraph of this Article, up to a limit of 30% of said rate. When shares of a company in which a risk mutual fund holds a participation are admitted to the main listing market of the Tunis Stock Exchange, they continue to be taken into account for calculating the employment rate provided in the first paragraph of this Article for a period not exceeding five years from the admission date. Risk mutual funds provided for in Article 22 bis of the Code on Collective Investment Undertakings operate through subscription or acquisition of ordinary shares or preferred dividend shares without voting rights, investment certificates, or through acquisition or subscription of partnership units. Risk mutual funds may also operate through subscription or acquisition of participatory securities, convertible bonds, and generally all other categories assimilated to equity in accordance with prevailing legislation and regulation. They may also grant advances in the form of current accounts with partners.

Article 21:
The provisions of Titles I and III of this Regulation apply to venture capital funds and risk mutual funds, except for the provisions of Articles 4, 5, 107, 110, 135, 137 and 140 of this Regulation.
A general decision of the Financial Market Council defines the conditions under which approval is granted when modifications affect a fund. The approval period is 3 months. (Order of the Minister of Finance of February 15, 2013, Art. 1)

Section 2: Provisions governing venture capital funds and risk mutual funds
Sub-section 1: Approval and establishment
Article 22:
The approval of a risk mutual fund or venture capital fund, hereinafter referred to as "fund", is subject to prior submission by the manager to the Financial Market Council of a file containing elements specified by a general decision of the Financial Market Council. (Order of the Minister of Finance of February 15, 2013, Art. 1) The Financial Market Council processes the approval request within a maximum period of three months from the date of submission accompanied by the necessary documents. This period is suspended until receipt by the Financial Market Council of additional information or actions requested.

Sub-section 2: Information documents for public use Paragraph 1: The issuance prospectus
Article 23 (new) (Order of the Minister of Finance of February 15, 2013, Art. 1):
The public offering made by a risk mutual fund or venture capital fund is subject to notification of its approval by the Financial Market Council (Added by Order of the Minister of Finance of February 15, 2013, Art. 2). The fund may not receive subscriptions until a prospectus has been established, approved by the Financial Market Council according to the model set by a general decision of the Financial Market Council. It must be made available to the public and delivered prior to any subscription. This delivery is free of charge and may be carried out by any means.

Paragraph 2: The internal regulations
Article 24 (new) (Order of the Minister of Finance of February 15, 2013, Art. 1):
The manager and depositary establish internal regulations according to the model set by a general decision of the Financial Market Council.

The plan and titles of the different sections of the internal regulations must be respected.

Paragraph 3: The annual report
Article 25:
The annual report is prepared by the manager at the close of each accounting period; it must contain the fund's financial statements in accordance with prevailing accounting regulations and include certification by the statutory auditor. This report must notably contain the following information:

• asset breakdown;
• liability breakdown;
• a report on the implementation of management orientation defined by the fund's internal regulations (management policy, investment distribution, co-investments and co-divestments carried out alongside portfolios managed or advised by the manager or an affiliated company);
• the total amount of fees charged to the fund and their nature (sectoral analysis, target accounting audit...) and when beneficiaries are companies affiliated with the manager, the report indicates their identity as well as the total charged amount;
• changes in valuation methods and their reasons;
• the number of units in circulation;
• revenue breakdown;
• indications of movements occurring in fund assets during the period;
• income and expense account;
• realized capital gains or losses;
• allocation of results;
• net asset values recorded at the beginning and end of the accounting period.
  The annual report is communicated to the Financial Market Council within a maximum of six months after the close of the accounting period.
  It is made available to unit holders at the registered office of the fund's portfolio management company. It is sent to any unit holder who requests it within a week following receipt of the request. (Added by Order of the Minister of Finance of February 15, 2013, Art. 2) Subject to the unit holder's agreement, this dispatch may be carried out electronically. (Added by Order of the Minister of Finance of February 15, 2013, Art. 2)

Section 3: Specific provisions governing venture capital funds and risk mutual funds benefiting from an expedited procedure
(Order of the Minister of Finance of February 15, 2013, Art. 4) Sub-section 1: Specific provisions
Article 26 (new) (Order of the Minister of Finance of February 15, 2013, Art. 1):
Risk mutual funds governed by Article 22 quinquies of the Code on Collective Investment Undertakings as well as venture capital funds benefiting from an expedited procedure, hereinafter referred to as "funds benefiting from an expedited procedure", are subject to the provisions of this section.

Article 27 (new) (Order of the Minister of Finance of February 15, 2013, Art. 1):
Any subscription or acquisition request for units of one of these funds must be accompanied by a warning recalling that subscription, acquisition, or transfer of units is reserved for sophisticated investors. This warning recalls that it is a fund benefiting from an expedited procedure.

Article 28 (new) (Order of the Minister of Finance of February 15, 2013, Art. 1):
Establishment of the fund benefiting from an expedited procedure is subject to approval by the Financial Market Council according to procedures and terms specified in Article 29 of this Regulation.

Sub-section 2: Approval
Article 29 (new) (Order of the Minister of Finance of February 15, 2013, Art. 1):
Approval of a fund benefiting from an expedited procedure is subject to prior submission by the manager to the Financial Market Council of a file containing documents specified by a general decision of the Financial Market Council. The Financial Market Council