الهيئة العامة للرقابة المالية

Dr. Mohamed Farid- FRA Chairman:

• FRA has issued the Unified Insurance Law, a significant step towards regulating and digitizing financial transactions.
• FRA has lowered the minimum capital requirement for establishing fintech startups in the non-banking finance sector to EGP 15 million.  
• Portfolio management companies are now allowed to offer robo-advisors for investment, a first in Egypt.  
• FRA has finalized regulations for the registration and trading of SPACs and has received the first application for incorporation.

Dr. Farid highlighted FRA’s initiatives in implementing a unified insurance law and its positive effects on the competitiveness of Egypt’s insurance sector. Additionally, he underscored the Authority’s efforts to promote financial technology and digital transformation, which have facilitated access to appropriate financing for all segments of society. This, in turn, has created opportunities for individuals to expand or start economic ventures that contribute to a higher standard of living.

During the Egyptian British Business Association’s door-knocking mission in London, FRA Chairman highlighted FRA’s efforts to issue the first unified insurance law. This law aimed to enhance the competitiveness of Egypt’s insurance sector and promote financial technology. Ministers of Finance and Investment, Chairman of the General Authority of the Suez Canal Economic Zone (SCZONE) and Administrative Capital for Urban Developments (ACUD) and representatives of the Egyptian and British private sectors attended the event.

Dr. Farid emphasized that the promulgation of the Unified Insurance Law was a crucial step in regulating and digitizing financial transactions. This initiative aimed to increase the number of individuals benefiting from insurance coverage using financial technology. He explained that this was the first unified law for the insurance sector, replacing the four separate regulations previously in place.

Dr. Farid stressed the importance of investing in the professional development of insurance professionals to create a highly skilled workforce capable of improving efficiency and competitiveness. Additionally, he highlighted the need to increase the size and stability of insurance companies while fostering flexibility in business models.

He emphasized that this has enhanced the Egyptian insurance sector’s competitive capabilities, attracting domestic and foreign investment, increasing insurance penetration, and fostering greater stability among insurance companies.

In addition, he pointed out that digital transformation contributes to facilitating access to adequate financing for all segments of society, providing opportunities to expand or start economic activities that improve standard of living.

FRA’s Chairman emphasized that the Authority issued several regulations and decrees to support entrepreneurship, innovation and financial technology. The Authority has introduced new regulations for the financial evaluation of startup. These standards incorporated new methodologies that reflect the unique characteristics and growth stages of startups, particularly those operating before generating revenue or sales. This facilitated access to the necessary funding for startups to grow, expand, and achieve their objectives.

Additionally, FRA set certain rules for establishing and licensing fintech startups engaged in non-bank financing activities. The said rules set a minimum capital requirement of 15 million Egyptian pounds, compared to the previous 75 million Egyptian pounds minimum for companies engaged in non-banking financial activities excluding real estate financing, which requires a minimum capital of 100 million Egyptian pounds.

FRA finalized a legislative and regulatory framework to accelerate digital transformation and promote financial inclusion. This framework included a package of decrees  and regulations aimed at digitizing non-bank financial transactions, increasing the number of individuals benefiting from non-bank financial services.

Dr. Farid explained that FRA complemented the existing legislative framework by issuing Law No. 5 of 2022 and Decree No. 58 of 2022. These regulations aimed to regulate the use of financial technology in non-banking financial activities and establish the conditions and procedures for licensing and approving fintech companies.

FRA issued Decree No. 139 of 2023 to establish standards for equipment, technological infrastructure, information systems, and security measures for fintech companies engaged in non-banking financial activities. Additionally, Decree No. 140 of 2023 outlined the requirements for digital identity, digital contracts, digital records, and the permissible use of fintech in non-banking financial activities. This was the first regulatory decree issued by the Authority to detail Know Your Customer (KYC) procedures.

Furthermore, Decree No. 141 of 2023  that establishes a registry for outsourcing service providers engaging in fintech activities (the “Outsourcing Registry”).

As a result of these regulatory measures, four companies registered as fintech outsourcing service providers have signed contracts with approximately 40 non-bank financial institutions. Negotiations are underway with an additional 60 non-bank financial institutions. Moreover, four companies, including fintech startups, have been licensed to provide their services using fintech.

FRA Chairman announced that the Authority issued Decree No. 57 of 2024, which establishes regulations for the operation of automated financial advisor investment programs, commonly known as robo-advisors. These programs are electronic systems that utilize artificial intelligence algorithms to provide financial advice, manage, and rebalance clients’ investment portfolios.

In addition, he explained that companies can offer automated financial advisory services through two business models. In the first model, a portfolio manager who reviews the outputs of the automated system manages an investment portfolio. Transaction execution is then automated through a securities brokerage company. In the second model, the automated system manages and rebalances the investment portfolio, with the portfolio manager reviewing the program’s outputs.

He added that Portfolio Management Companies are permitted to provide automated financial advisory services through the Robo-Advisor for Investment program.

FRA issued Decree No. 148 of 2024, which establishes regulations for special purpose acquisition companies (SPACs). One of the requirements is for SPACs to temporarily list  their shares on the Egyptian Stock Exchange to a minimum of 10 million Egyptian pounds. Additionally, SPACs must increase their capital in cash to 100 million Egyptian pounds within three months of listing their shares.

Additionally, the information memorandum accompanying the listing request must include several key items: general company data, the expertise of its founders and board of directors, target sectors and investment controls, and a detailed investment plan for acquiring the target company or companies. This plan should outline the acquisition method, specifying whether it will be in cash, credit, or shares.

Also, the said  decree stipulates that the information memorandum must also include investment risks, redemption controls, the framework governing the management of the company’s capital, including the funds raised from the subscription, along with disclosures of associated persons and related parties, and measures to mitigate conflicts of interest.

Additionally, eligible investors should be informed that subscribing to the shares implies their agreement to trade their shares at a price not exceeding the nominal value until the disclosure report is published following the completion of the acquisition or the release of the company’s financial statements for the first fiscal year after incorporation.

Dr. Farid also confirmed that FRA will set a minimum of 50 shareholders and ensure that freely traded shares constitute at least 5% of the company’s total shares. Furthermore, trading of the company’s shares will be restricted to financial institutions and qualified investors under the supervision of the executing brokerage firm until the necessary requirements for public trading are met.

In addition, the decree stipulates that the draft acquisition resolution, encompassing all details related to the activities of the target company or companies must be presented to the company’s Extraordinary General Assembly within six months from the date of listing the company’s shares on the Stock Exchange. Founders and their related parties are prohibited from voting on this resolution. Additionally, shareholders who object to the acquisition resolution at the General Assembly meeting have the option to exit the company within 30 days of voting.

He added that the company must complete the acquisition process within two years from the date of listing on the Stock Exchange. The acquisition of the target company or companies should result in acquiring (100%) of the capital or voting rights, or a controlling interest, followed by either integration into the company or retaining the acquired companies as subsidiaries, as determined by the company’s Extraordinary General Assembly.

FRA subsequently received the initial application to establish the first SPAC, a venture capital company intended to acquire non-banking financial services and fintech companies operating in the fields of finance, financial services, and payment platforms.

SPACs are companies established and licensed by FRA as venture capital companies with the exclusive purpose of acquiring other companies across various economic sectors. These companies raise the necessary funding for acquisitions through a private placement of their capital increase on the stock market, subject to the condition that subscription to their capital increase is restricted to qualified investors and financial institutions and trading is limited to qualified entities only. SPACs are obligated to complete acquisitions within a maximum of two years from the date of their temporary listing on the Stock Exchange, in accordance with applicable regulations and requirements.