Precious Metals investment funds
In a major step towards the stabilization of precious metals markets, especially Gold, Dr. Mohamed Farid, chairman of the Egyptian Financial Regularity Authority (FRA), announced that FRA has already completed the regulatory and legislative framework for Funds to deal in metals including the criteria of Investments Funds and how to work in precious metals, establishing a special list for service provider of metal custody in accordance with legal disciplines and requirements and establishing another list for the entities that the fund shall deal with it in buying and selling the minerals.
The announcement declared within the activities of the FRA’s conference regarding the launch of the first investment fund in gold by the private sector through “Azimut Egypt” and “Evolve Financial Group”, where the door became open for investment fund management companies to apply for FRA in order to obtain the required approvals to start dealing in various metals as the announcement affirmed that this regulation issued by the FRA aims to support the state’s efforts to enhance levels of financial and investment inclusion by diversifying the various investment options for each Category of citizens.
The regulatory and legislative controls for investment funds in precious metals
We will discuss the regulatory and legislative disciplines for dealing with such funds as follows:
The FRA issued many regulatory decisions regarding how the investment funds can deal in metals as one of the movable financial values, in light of the provisions of article (35) of the Capital Market Law through-which the FRA’s board of directors can authorize such activities to the fund, where the fund is licensed to deal in movable financial values, including minerals.
Decree no. 50 for 2023 and no. 71 for 2021:
The FRA’s board of directors’ decree No. 50 of 2023 has been issued to amend FRA’s board of directors’ decree No. 71 of 2021 regarding the disciplines of investment funds to deal in metals as one of the movable financial values.
According to this decree, the Fund’s Board of Directors or the Fund’s Supervisory Committee may, without prejudice to their obligations in this regard, seek the assistance of any service providers for the Gold Custodian of which registered at FRA, and the investment manager is obligated to deal in the sale and purchase of metals through the entities registered in the above-mentioned concerned list, and to observe the disciplines set by FRA in this regard, with the Fund’s obligation to provide the FRA with a copy of the contract between the fund and the aforementioned service providers.
Decree no. 51 for 2023:
In this regard, A decree No. 51 of 2023 has been issued by FRA’s board of directors regarding the disciplines for registering and delisting the providers for the Metals Custodian as one of the movable financial values in the FRA’s register.
This decree included the conditions that should be met by the providers for the Metals Custodian in terms of the legal form of incorporation by one of the forms of companies mentioned in Joint Stock Companies law, limited partnership companies by shares, limited liability companies and one person companies, Such decree also includes the terms of availability the minimum technical and technological requirements determined by FRA, In addition to the required conditions relating the headquarters and Safes in which the fund’s assets shall be kept securely, systems and foundations of internal control and financial audit, and finally the system for storing and retrieving customer instructions.
The above-mentioned decree also included the obligations of the providers for the metal’s custodian, the most important of which is to maintain separate accounts for each investment fund and provide quarterly periodic data of each fund assets with the provision of separate places for the metal custody of each fund separately, in addition, an insurance policy should be issued by one of the insurance companies licensed by FRA to be submitted for the duration of the contract, the insurance coverage scope shall be included a minimum guarantees of fire, robbery, loss and damage for any reason, dishonesty which include negligence or omission of employees, the risks of forced theft during the transport of mineral by cars within the Arab Republic of Egypt, natural disasters, as well as any additional risks.
The scope of insurance coverage shall include risks associated with transportation and shipping if it is agreed that the company shall do it, the period of registration in the register is three years and renewed for similar period, provided that the renewal application shall be submitted during the three months preceding the expiry of the registration period, the renewal of registration in the register requires the continuation of the required conditions for registration.
Decree no. 52 for 2023:
The FRA’s board of directors also issued decree No. 52 of 2023 regarding the disciplines for registration and delisting in the FRA’s List for the entities that investment funds shall deal with in the purchase and sale of metals.
The decision included a number of conditions that the service provider shall have in a way that contributes to increasing the efficiency of the investment process for this category of funds, and the most important condition is that such entities shall take the institutional form and its purposes shall include dealing in metals, buying, selling, and to be licensed to do so by the competent authorities, with a minimum of previous experience at least for two years.
Also, it shall be registered at the Egyptian Exchange for Commodities within the trading companies Category (A), which deals in the metals for its own benefit or for its customers as an intermediary, in addition to it shall have a membership of one of the relevant unions, associations or professional associations, provided that it shall have a system of pricing service of minerals approved by the FRA, and it shall be announced.
The aforementioned decree included the formation of a committee consisting of legal and technical elements for total examination to ensure that the registration required documents and conditions are fulfilled, The FRA shall issue its decision on the registration request within a period not exceeding fifteen days from the date of fulfilling the requirements, in addition to the measures that may be taken by the FRA’s board of directors in the event that the service provider loses one of the registration condition in the aforementioned register.
How to invest in Gold Fund?
The managing company of the gold investment fund, clarified that prospectus in fund’s units are now available, as the price of investment unit will start from 10 EGP and the redemption is available in cash and in kind.
We will explain the necessary steps to start investing in gold through the fund as the following:
- Opening an account for the client in the receiving entities nominated by the Fund’s issuer.
- Transfer the amount of money to be invested.
- Signing the concerned form for investing in gold through the fund, thus converting the amount of money into investment certificates in gold.
- Any investor may have a redemption on his units or part thereof in addition to their realized profits at any time, the investor may have a physical redemption or a redemption on cash, according to the Fund’s prospectus.
In a major step towards activating modern technology in financial and economic activities, EXG announced the start of publishing spot prices of gold through its website, and the Chairman of the EXG explained that the establishment of investment funds in precious metals, especially gold, will control the market, increase its transparency, and rationalize the demand for the purchase of gold bullion and pounds with an organized alternative submit to the rules of governance and transparency, allowing investors to invest in the precious metals without the need to buy gold from the markets and keep it, and also without additional payment costs, reducing risk, streamlining and maximizing long-term return.