The State Council’s department of Fatwa and Legislation sent the amendment draft of the capital market by-law to the Ministry of Investment after reviewing it, according to sources who requested anonymity.
The State Council reviewed the amendments of the law Saturday, to ensure the amendment’s legal setting and its wording accuracy.
The Egyptian Financial Supervisory Authority (EFSA) announced on 19 August the Economic Legislation Committee of the Supreme Committee for Legislative Reform’s approval of the proposed amendments to the Capital Market Law, with only a few comments on the draft’s wording.
The amendments included adding new financial instruments, like bonds covered with cash flows for real estate financing contracts and other financial assets, which is a mechanism that complies with government agencies like the New Urban Communities Authority (NUCA).
After the government issued the amendments, EFSA is expected to determine the percentage of bonds issued from the value of assets, in addition to the credit rating and the risk factor criteria.
Amendments also included developing bonds without credit ratings to facilitate small and medium enterprises (SME) obtaining financing through issuing this category of bonds without the burden of obtaining a credit rating that has to be renewed annually.
According to previous statements by head of EFSA Sherif Samy, offering bonds that are not covered with a credit rating will be limited to only financial institutions and investment funds to ensure the availability of sufficient expertise and qualifications to assess the risks.
The amendments introduce charity investment funds that are known internationally as Awqaf Funds, which do not distribute profits on investors but rather allocate them for charitable purposes.
Samy explained to Daily News Egypt that charitable funds allow freedom of investment without restrictions of specific investment funds. They will be able to invest in stocks, deposits, or fixed-debt instruments such as treasury bonds and bills, in addition to other assets.
Amendments prohibit registration of cash funds in the stock market, similarly to open-end funds, where documents are sold and bought through brokerage companies.
These amendments are not the first of their kind this year; the Ministry of Investment approved new rules in the capital market by-law in April. They included the organisation of the issuance of capital stocks to ensure that they comply with both the international rules and the requirements of Egyptian auditing standards.
A new item was introduced, where – at the request of the board of directors and managing partners – stipulating that the Extraordinary General Assembly for Companies is allowed to offer some or all increased shares for initial public offering (IPO) directly without taking into consideration the priority rights of old contributors.