FRA works to maximise the role of risk departments in brokerage firms to support market stability

Daily News Egypt
5 Min Read

The Financial Regulatory Authority (FRA) — in cooperation with the Egyptian Exchange (EGX) — organised a training programme to develop the capabilities of securities brokerage firms licensed by the authority to activate the role of risk departments and raise the level of their employees.

This will be done over two phases — the first this month and the second in October.

The training programme comes in light of the FRA’s follow-up and evaluation of the actual practices of companies and entities licensed to practice non-banking financial activities — especially brokerage companies in securities — and its provision of all means and systems and the issuance of rules that ensure the efficiency, stability, and safety of these markets.

About 60 trainees participated in the first phase of which is titled ‘Risk Management in Companies Operating in the Stock Market.’

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Each stage takes place over four days, during which the concept and role of risk management in companies operating in the financial markets is clarified, market risk models and credit risk are reviewed, and the importance of the enterprise risk management process and how the enterprise risk management process is applied.

The FRA also reviewed the requirements contained in its Board of Directors’ Decision No. 72 of 2022 regarding the regulation of the rules for the practice of brokerage firms in securities and custodians for the operations of purchasing securities on margin as part of the authority’s strategy to maximise the role played by risk managers in brokerage firms to support market stability.

For his part, Ahmed Al-Sheikh — Vice-President of the FRA — said during the opening of the training programme that the authority adopts an integrated framework to activate the role of risk managers in securities brokerage firms, in light of its work on the safety and stability of non-bank financial markets and the balance of rights of all transacting parties.

“Contributing to the dissemination of financial and investment awareness and culture and supervising the training and upgrading of workers in the non-banking financial markets is one of the main tasks of the authority, in addition to its regulatory, developmental, and supervisory role,” he added.

“This is done with the aim of improving the level of performance and efficiency of human resources in those markets and creating technical cadres that contribute to supporting the stability of non-banking financial markets and reduce the risks that they may face.”

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Furthermore, he announced that the training programme will be held again to complete the training of all risk managers in companies operating in the stock market, stressing the importance of this type of training programmes and meetings to identify the problems facing officials and workers in the non-banking financial markets to work on confronting them within the framework of the authority’s adoption of the partnership approach to develop markets.

Moreover, Al-Sheikh stressed the necessity of verifying the ability of clients to fulfil their obligations resulting from margin purchases, the funding sources available to them, their financial solvency and investment objectives, identifying the pattern of their previous transactions, analysing such data, and inquiring through the bodies specified by the authority about the amount of financing granted to clients and their groups.

He also emphasised how these are linked at the market level and that the percentage of guarantees to the total financing and the extent of their exposure during the period prior to granting them financing.

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Additionally, the company and the custodian must keep this study in the client’s file and update it at least once every twelve months or whenever necessary and commit to providing the authority and the EGX with any data or documents they request in accordance with this clause.

These amendments come from the reality of following up the actual practices of the parties that obtained the approval of the authority to engage in the purchase of securities on margin and evaluating the extent of commitment to studying and analysing risks before granting marginal financing according to the client’s condition and the performance of the security.

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