FRA Licensing Specifications for Ch

The Financial Regulatory Authority (“FRA”) published its board of directors’ decision No. 53 of 2019 (the “Decision”) on its website through which it specified the types of investment funds that are not to be licensed as charitable investment funds.[1] Introduced through an amendment[2] to the Executive Regulations (the “ER”) of the Capital Market Law in 2016 in order to provide a more transparent and sustainable financing mechanism[3] for charity and social work,[4] and further regulated through a 2018 amendment to the ER,[5] charitable investment funds are investment funds with profits and returns being specifically distributed only on spending on social or charitable purposes through formally registered associations and NGOs or through government agencies. In other words, the certificate holders in these funds do not get the profits and returns of investment, which are instead channelled towards certain social and charitable purposes,[6] namely education and training, social welfare, healthcare, rural and slum development, and other FRA-approved community service and development.[7] The amended ER also provide that the FRA board of directors would specify the funds that may not be licensed as charitable investment funds. In accordance with this, the new Decision allows charitable investment funds to invest in all types of investment funds except for those with certificates that must be listed and traded in the securities exchange. In other words, all investment funds, except those with certificates that must be listed, can be licensed as charitable investment funds.   [1] FRA Board of Directors Decision No. 53/2019 specifying the types of investment funds that may not be licensed as charitable investment funds, available through this link (in Arabic). [2] Ministry of Investment Decision No. 6/2016 amending certain provisions of the Executive Regulations of the Capital Market Law issued by virtue of Minister of Economy and Foreign Trade Decision No. 135/1993, Egyptian Gazette, Issue No. 37, 15 February 2016. [3] Financial Regulatory Authority, “FRA’s Board of Directors grants license to Microfinance Investment Funds to deal in the movable values”, dated 17 April 2018, available through this link. [4] Financial Regulatory Authority, “Under the Auspices of the Financial Regulatory Authority (FRA): a Memorandum of Understanding (MoU) was signed between Misr Elkheir Foundation and Mubasher Invest to launch five charitable investment funds”, dated 21 May 2018, available through this link. [5] Ministry of Investment and International Cooperation Decision No. 40/2018 amending certain provisions of the Executive Regulations of the Capital Market Law issued by virtue Decision No. 135/1993, Egyptian Gazette, Issue No. 59 (cont.) (a), 12 March 2018. [6] Financial Regulatory Authority, “The Issuance of the Decisions Regulating Charitable Investment Funds”, dated 9 March 2016, available through this link (in Arabic). [7] FRA Board of Directors Decision No. 19/2016 on the social or charitable purposes on which the profits and returns of investment of a charitable investment fund can be distributed, Egyptian Gazette, Issue No. 76, 31 March 2016.