الهيئة العامة للرقابة المالية

• Dr. Mohamed Farid: Potential amendments to Capital Market Law paves the way for Hedge Funds.

• Geopolitical tensions and rising interest rates are creating a turbulent economic climate, especially for developing economies facing reduced investment flows

• FRA ensures markets operate smoothly and efficiently while prioritizing stability and protecting the rights of investors and participants pursuant to best international practices

• Digital transformation is essential to expand financial inclusion. By embracing digital tools and services, we can unlock access to non-bank financial services for a wider range of people

• Voluntary Carbon Market creates new investment options for companies looking to diversify their portfolios and allows them to stay competitive in the global market, particularly by ensuring access to European markets

• The surge in interest for gold-backed investment funds suggests a favorable legal and regulatory framework that make them an attractive option for investors seeking exposure to gold

• New regulations for Robo-advisory services are expected to be announced within days. This move aims to create a more competitive market

Dr. Mohamed Farid , FRA’s Chairman participates in a seminar held by the London Stock Exchange Group (LSEG) in Cairo under the theme “A new era of digital trends: the future and challenges of financial markets and wealth management”. The discussion was managed by Yasmine Saleh, editor-in-chief of the Zawiya Arabic website.This seminar dives into how rapid digital advancements are challenging financial markets, demanding innovative wealth management solutions in the face of ongoing economic crises.

Dr. Farid emphasizes that FRA is prioritizing digitization of non-banking financial services. This push aligns with the Authority’s strategy to develop the non-banking sector and make financial products more inclusive (including access to investment and insurance) as the demand for these services grows in light of the technological development which facilitate access to non-bank financial services and products.

He stresses that this digital transformation requires strong governance and reliable systems to protect customers and maintain stability in markets and non-bank financial institutions.

He adds that within the coming period , FRA will allow Robo-advisory tools in portfolio and investment management.These essentially automated financial product use algorithms to recommend investments based on an investor’s risk tolerance.
Based on risk tolerance, the Robo-advisor will recommend suitable investments. This could include low-risk options like government bonds, with minimal risk of default.

This system constantly tracks the market and uses this information to suggest right investment opportunities at the right time.He adds that while AI is a powerful tool for digitization and financial technology, it relies on high-quality, up-to-date data to function effectively. To ensure responsible and optimal use of AI in financial services, clear regulations are needed to govern its operations.In addition , Dr. Farid stresses on the need for clear guidelines from the beginning, such as those for electronically verifying client identities.Dr. Farid tackles the unique and challenging global economic climate, and its impact on developing economies like Egypt.

Also, he highlights the world’s volatile economic climate, fueled by geopolitical tensions that have triggered interest rate increases. These hikes have stifled investment flows to emerging economies.

He emphasizes that during this extraordinary conditions , Regulators must step up with effective policies to safeguard market stability, client protection using global best practices.Dr. Farid sheds light on the Authority’s efforts to activate digital transformation within the non-banking financial system. This aligns with its goal to achieve financial inclusion, as envisioned by the Egyptian government by expanding access to these services digitally to improve the financial well-being of citizens and empower them to achieve their investment, financing, and insurance goals.

The Authority issues some executive decisions to activate Law No. 5 of 2022 on regulating and developing the use of fintech in non-banking financial activities and services.

Dr. Farid announces three key decisions to accelerate the digitization of non-bank financial services. These decisions address: 1) establishing the necessary technology infrastructure, 2) implementing digital identity verification, digital contracts, and digital record-keeping, and 3) creating a registry of qualified outsourcing service providers.He adds that the new minimum capital limit is 15 million Egyptian pounds for fintech companies offering non-banking financial services. This brings these startups under the Authority’s supervision and ensures a safe and regulated environment for their operations.

It is worth mentioning that this decision only applies to fintech startups offering non-banking financial services, not startups in general.

Dr. Farid announces the Authority submits a proposal to amend the Executive Regulations of the Capital Market Law. This amendment would introduce rules for establishing hedge funds in Egypt. The goal is to diversify investment options and enhance the competitiveness and appeal of the Egyptian financial market.

Hedge funds offer investors a wider range of investment options compared to traditional funds. This flexibility comes from looser regulations, allowing them to invest in various financial instruments across the market.

Hedge funds employ diverse strategies to achieve their target returns, which can be quite high. However, these strategies often involve significant risk. To participate, investors typically need to meet minimum wealth or income thresholds.

Dr. Farid attributes the rise in public company securities offerings to two factors: government management of its financial assets and the private sector’s strategic decision to benefit from issuing securities.Dr. Farid points out that a large and active investor base is crucial for efficient markets. This ensures accurate pricing, greater market depth, and higher trading volume.

In a related context, Dr. Farid emphasizes that the clear regulations issued by FRA have empowered and encouraged many companies to launch specialized gold investment funds. These funds offer a transparent and easy way for people to save and invest in gold.

He elaborates that regulations set for launching investment funds in assets other than gold, like silver, are nearing completion. This follows the successful launch of Egypt’s first gold fund, “AZ-Gold” by Azimut, in May 2023.

Another fund the Beltone Evolve Gold Fund “Sabayek” was approved for launch this year (2024).

Also, he reveals that a proposal from an Ahli Bank company to launch another gold investment fund is under review.

Dr. Farid emphasizes the significant progress made by the Authority in establishing the legal and regulatory framework for Africa’s first voluntary carbon market.He points out that companies can leverage the voluntary carbon market to diversify their investments and stay competitive in the global market. This can be achieved by implementing carbon emission reduction projects that meet international standards, allowing them to access the European market for carbon credits.