الهيئة العامة للرقابة المالية

• The Authority has created a comprehensive framework to protect stakeholder rights, encompassing licensing of investment funds and their investment policies, as well as creating registers for authorized gold traders and custodians engaged with investment manager.
• To date, the Authority has licensed only three gold investment funds and crucially, their comprehensive investment prospectuses have been made publicly available.
• FRA registers qualified gold suppliers (different from public sellers) and qualified custodians who are authorized only for investment funds, not for direct individual dealings.
• FRA-licensed funds have attracted 200,000 investors, representing a total market value of EGP 2.1 billion.
• Commercial Law and Law of Precious Metals and Gemstones provide the legal framework for dealings between metal traders and investors or consumers, a domain outside the regulatory authority of FRA.

In accordance with Article 35 of the Capital Market Law No. 95 of 1992, FRA regulates the interaction between licensed investment managers and authorized metal trading companies, specifically concerning the issuance of investment fund certificates for metals such as gold. This regulatory framework does not extend to a general license for precious metal trading.

FRA warns against misleading promotions for direct gold purchases falsely suggesting its endorsement of metal trading companies. FRA’s established register is strictly limited to companies authorized to transact with investment managers and does not regulate precious metal traders’ dealings with the public. Instead, these public interactions are governed by the Commercial Law (Law No. 17 of 1999), Law Precious Metals and Gemstones (Law No. 68 of 1976) and other relevant Egyptian legislation, a separate legal framework from the Capital Market Law (Law No. 95 of 1992) which specifically regulates precious metal investment funds, not direct transactions between traders and investors in Egypt.

FRA strongly urges citizens and investors to exercise utmost diligence and caution. Any gold trading company falsely claiming affiliation with or licensing from FRA should be immediately reported, as the Authority will pursue stringent legal action against such entities. FRA also underscores the critical need for individuals engaging in precious metal investments outside of regulated investment funds to secure physical possession of the metal to ensure the protection of their rights.

As a key aspect of its regulatory oversight, FRA emphasizes that citizens’ engagement with precious metals is specifically governed through investment funds under the Capital Market Law No. 95 of 1992. To ensure robust investor protection and transaction integrity, FRA has issued number of decrees. These include establishing clear controls for metal investment funds operating as securities, with specific criteria for eligible metals such as hallmarking and verified ownership. Moreover, investment managers are mandated to transact in metals solely with FRA-registered trading companies and utilize the services of FRA-registered custodians. FRA has established regulations for both the registration and delisting of precious metal custodians as providers of movable financial asset services in its registry, alongside the specific conditions that gold trading companies must fulfill to be eligible for buying and selling transactions with investment managers.

In light of the above, the Authority has approved three funds for investment in precious metals, specifically gold: AZ-Gold Fund by Azimut Company, Al Ahly Financial Investments Management and Beltone Evolve Gold Investment Fund (Sabayek). Currently, approximately 200,000 investors have invested a total of EGP 2.1 billion in these funds.

Legislative and Regulatory Evolution of Precious Metal Funds:

Article 35 of the Capital Market Law No. 95 of 1992 permitted investment funds to deal in movable financial assets, including precious metals like gold. This was followed by the following executive decrees:

• Decree No. 71 of 2021 allows the Authority to license joint-stock companies, banks, and authorized investment fund companies (acting alone or with others) to invest in metals as transferable financial securities, provided this is within the fund’s defined objectives and governs such dealings.

The decree specified the controls that must be met by the metals in which investment is permitted, which are:

The competent authorities must hallmark the metals and their trading must be conducted through manufacturers, traders or other entities that have obtained the necessary approvals for such activities. The ownership of the metals must be established and not subject to any legal dispute.

The investment policy included in the prospectus or information memorandum, as the case may be, must specify the type of metals eligible for investment, the nature of the revenues targeted from such investment, the minimum liquidity ratio to be maintained to meet the fund’s obligations and the dividend distribution policy.

The Authority stressed that, in all instances, the risks associated with this type of investment and their mitigation strategies must be disclosed. FRA also emphasized the necessity of insuring the fund’s assets with an Authority-licensed entity.

• Decree No. 50 of 2023 requires the fund’s investment managers to execute all metal buying and selling transactions exclusively through entities registered in the Authority’s register. Furthermore, they are required to contract with custodians listed in the Authority’s register.
• Decree no. 51 of 2023 governs listing and delisting of precious metal custody service providers as transferable securities within the Authority’s Register.

This decree mandates that such entities must adopt a corporate structure as defined in the Law on Joint Stock Companies, Limited Partnerships by Shares, Limited Liability Companies and Single-Person Companies. Furthermore, their core objectives must include the transfer and custody of funds and metals, they must have obtained all necessary approvals from relevant Egyptian authorities to offer precious metal custody services, possess the technical and technological infrastructure as determined by FRA and maintain secure and suitable precious metal custody facilities for service provision.

• Decree No. 52 of 2023 establishes the conditions for entities authorized to engage in metal trading with investment funds within the Authority’s Registers, including the requirement to adopt a corporate structure as defined in the Law on Joint Stock Companies, Limited Partnerships by Shares, Limited Liability Companies, and Single-Person Companies and to maintain capital not less than the minimum threshold determined by the Authority’s Board of Directors (set at a minimum of five million Egyptian pounds).

The decree requires the entity to aim to buy and sell metals (with necessary licenses from authorities), have at least two years of relevant experience, and be a member of the Egyptian Commodities Exchange, registered with the Assay and Weights Department, or any other competent body approved by the Authority.

If the two-year experience requirement is not met, the entity’s issued and paid-up capital must be at least EGP 15 million and its shareholders’ equity must equal or exceed the paid-up capital.

The decree also mandated that precious metal custody service providers registered with the Authority submit an insurance policy, issued by an Authority-licensed insurer, covering risks such as fire, burglary, loss, damage, breach of trust and employee negligence or dereliction.

Legislative Impact:

The regulatory framework has led to the licensing of three exclusive gold investment funds, which have successfully drawn significant investor interest, evidenced by the participation of 200,000 citizens and a total investment of EGP 2.1 billion. These are the only entities with FRA’s authorization to publicly offer subscriptions for investment funds in precious metals, including gold. They are:

• AZ-Gold Fund by Azimut Company
• Al Ahly Financial Investments Management
• Beltone Evolve Gold Investment Fund (Sabayek).

Established by the 2014 Egyptian Constitution and Law No. 10 of 2009, the Financial Regulatory Authority (FRA) is an independent public legal entity mandated to regulate and supervise non-bank financial markets and instruments. This includes capital markets, futures exchanges, insurance and non-bank financing encompassing real estate finance, financial leasing, factoring, consumer finance and SME/microfinance. FRA aims to ensure the safety, stability, regulation and development of these markets, protect stakeholder rights and promote efficiency and transparency in their operations.