Investment Companies Allowed to Par

On 10 December 2019, the Egyptian Gazette published the Financial Regulatory Authority (“FRA”) Decision No. 160 of 2019[1] which introduces an amendment on the requirements for licensing banks and financial companies to undertake investment fund activities.  Previously FRA had, in June 2018, issued Decision No. 58 of 2018[2] which set out the procedures and requirements for licensing banks and financial companies to undertake investment fund activities, whether on their own or in collaboration with other entities. That Decree stated that banks would be allowed, by license from FRA and approval from the Central Bank, to undertake funds activities on their own as stated in the Capital Market Law. As for financial companies subject to FRA’s supervision, they may request a license to undertake such activity provided this applies only to insurance companies, reinsurance companies, investment banks, and micro finance companies, and that they undertake such activity on their own or in collaboration with other entities. Such entities, however were stated to be (1) foreign financial institutions and companies, (2) public juristic personalities with investment as one of their objects, (3) pension funds, (4) private insurance funds, (5) the post authority, (6) financial leasing companies, (7) mortgage finance companies, and (8) factoring companies. The amendment introduced by the new decision replaces the concept “public juristic personalities with investment as one of the objects” with a different one, that is “public and private juristic personalities with investment as one of their objects provided the private juristic personalities are not one of the entities subject to the Authority ‘s supervision”. The effect of the preceding allows insurance companies, reinsurance companies, investment banks, and micro finance companies to undertake investment fund activities on their own or with any of the entities referred to above including – after the amendment – private companies not subject to FRA’s supervision, i.e. ordinary companies that have investment as one of their objects. This may seem like a minor amendment but it has a wide effect because it allows investment companies not subject to FRA’s supervision to undertake investment fund activities in collaboration with insurance companies, reinsurance companies, investment banks, or micro finance companies. Needless to say, that all of the above does not affect the principal rule which is allowing asset management companies licensed by FRA to undertake the activity of formation and management of portfolios and investment funds.   [1] FRA Board of Directors Decision No. 160/2019 amending Decision No. 58/2018 on the rules, regulations and procedures for licensing banks and certain financial companies to undertake investment fund activities alone or jointly with others, Egyptian Gazette, Issue No. 277, 10 December 2019. [2] FRA Board of Directors Decision No. 58/2018 on the on the rules, regulations and procedures for licensing banks and certain financial companies to undertake investment fund activities alone or jointly with others, Egyptian Gazette, Issue No. 134, 11 June 2018.