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The Financial Regulatory Authority’s Board Approves several important Amendments to Mutual Funds

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In light of the Authority’s continuous examination of the rules governing non-banking financial activities, especially those related to the Capital Market, and in order to develop those market and introduce new products to diversify the available investments in the market and allowing investors to choose between various products that the Authority seeks to provide. The Financial Regulatory Authority’s (FRA)  tries to reduce some restrictions that are found in mutual funds especially at the real estate investment trusts (REITs)  and charitable funds, and the rules set to define  the duties of  investment manager. In light of the practical application, FRA found out that some of these rules must be amended. After studying the proposed suggestions from entities operating in the market, FRA’s Board approved number of important amendments to the Executive Regulations of the Capital Market Law.

The amendments to the real estate investment trusts (REITs) included increasing the percentage in which the (REITs) may invest their funds in one project to be 50% if the size of the fund is 500 million pounds or less. In addition, if the fund size is more than 500 million pounds, then it will invest 30%  of its funds as long as there is an acceptable  feasibility study that is being disclosed to certificates holders. On the other hand, another restriction was amended regarding the fact that the total number of those who own 10% or more of the real estate investment trusts (REITs)   shall not exceed75% of the total of fund’s certificate. If these funds are listed at the Stock Exchange, then it shall meet some listing requirements, namely, the minimum number of certificates’ holders and the ratio of tradable certificates. In addition, another restriction is amended and it is related to the fact that ratio of the contribution of  the real estate investment trusts (REITs)  in the capital of the unlisted real estate company shall not be less than two-thirds of its capital. The new amendments grant the Fund the right to set the percentage of contribution which is in the interest of certificates’ holders pursuant to the fund’s investment policies.

The amendments approved by the Board also allow Investment Manager to use intraday trading system provided that the transactions shall not exceed 15% of the daily volume of fund’s transactions.

Regarding charitable funds, the new amendments allow these funds to invest in various types of mutual funds and it not being limited  to private equity funds or real estate investment trusts (REITs)  in accordance with the regulations set by the Authority .

In order to facilitate the work of the open-ended funds, the proposed amendments allow banks and insurance companies to issue more than one issuance for open-ended funds.

These amendments are part of the Authority’s efforts to develop the rules governing non-banking financial activities in order to create motivational legislative and regulatory environment. The Authority will send the amendments to the Executive Regulations of the Capital Market Law to the Minister of Investment for its issuance and it shall be applied on the day following its publication in the Egyptian Gazette.
 

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Regulator Information

Abbreviation: FRA
Jurisdiction: Egypt

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