Regulation of Money Market Funds
Regulation of Money Market Funds
Money Market Funds have existed in Egypt for a number of years but have not had an independent set of regulations from those of ordinary funds. This is no longer the case. Recently, the Minister of Investment issued new rules – as part of the Executive Regulations of the Capital Market Law – dedicated specifically to the regulation of Money Market Funds. This was issued by Decision of the Minister of Investment Number 126 of 2008.
Definition
Money Market Funds are defined in the new rules as those funds which « invest all their assets in short term investments such as debt instruments issued by the Government, banks, and companies, repurchase agreements, Treasury Bills, banks certificates of deposits and certificates issued by other Money Market Funds». It is important to note that in this definition (i) money market funds have to invest all of their assets in short term instruments and not a percentage or majority thereof, and that (ii) the listing of the short term instruments is not an exhaustive one, and therefore it is conceivable for the funds to invest in other short term instruments.Who May Establish Money Market Funds
According to the new regulations, only banks and insurance companies may establish money market funds, In addition, companies licensed to undertake Primary Dealers’ activities may be licensed to establish Money Market Funds. The rules do not state how such licenses would be awarded, and accordingly by application of the general principles of the Capital Market Law, it would be a license submitted to and issued by the Capital Market Authority.Prudential Rules
The new rules require certain prudential standards to be applied by the Money Market Funds. These are that:- The maximum term for the investments does not exceed thirteen months.
- The maximum weighted average for the maturity of the Fund’s portfolio be 150 days.
- No investment in one single issue exceeds 10% of the Fund’s net assets value, except where the investment is in Government papers.
- Investments are made in papers and instruments whose rating is not less than the threshold determined by decision of the Capital Market Authority provided that, in all cases, it is not below BBB. This, however, does not apply to investments in Government papers.
Transition Period
As previously said, Money Market Funds have been in existence for a number of years. Accordingly, the new rules state that already existing funds must comply with the new rules within one year from the date of its coming into force, i.e. before June 16th 2009.
Money Market Funds have existed in Egypt for a number of years but have not had an independent set of regulations from those of ordinary funds. This is no longer the case. Recently, the Minister of Investment issued new rules – as part of the Executive Regulations of the Capital Market Law – dedicated specifically to the regulation of Money Market Funds. This was issued by Decision of the Minister of Investment Number 126 of 2008.
Definition
Money Market Funds are defined in the new rules as those funds which « invest all their assets in short term investments such as debt instruments issued by the Government, banks, and companies, repurchase agreements, Treasury Bills, banks certificates of deposits and certificates issued by other Money Market Funds». It is important to note that in this definition (i) money market funds have to invest all of their assets in short term instruments and not a percentage or majority thereof, and that (ii) the listing of the short term instruments is not an exhaustive one, and therefore it is conceivable for the funds to invest in other short term instruments.Who May Establish Money Market Funds
According to the new regulations, only banks and insurance companies may establish money market funds, In addition, companies licensed to undertake Primary Dealers’ activities may be licensed to establish Money Market Funds. The rules do not state how such licenses would be awarded, and accordingly by application of the general principles of the Capital Market Law, it would be a license submitted to and issued by the Capital Market Authority.Prudential Rules
The new rules require certain prudential standards to be applied by the Money Market Funds. These are that:- The maximum term for the investments does not exceed thirteen months.
- The maximum weighted average for the maturity of the Fund’s portfolio be 150 days.
- No investment in one single issue exceeds 10% of the Fund’s net assets value, except where the investment is in Government papers.
- Investments are made in papers and instruments whose rating is not less than the threshold determined by decision of the Capital Market Authority provided that, in all cases, it is not below BBB. This, however, does not apply to investments in Government papers.