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FRA opens new horizons for investment funds to employ their financial resources in economic development projects - Monday 22/6/2020

• Dr. Omran: Issuing new controls on allowing private equity funds to practice some specialized activities shall facilitate and attract more investments within sectors related to economic development

 FRA adopts an initiative that will attract and facilitate the flow of investments towards economic development projects and related activities within the arteries of the national economy.  Dr. Mohammed Omran, FRA’s Chairman issues a new regulatory decision on allowing private equity funds to practice some specialized activities. Such decision will maximize the role of investment funds, especially private equity funds to be engaged in a number of activities related to economic development in specialized investment sectors, including the industrial and agricultural development sectors and their complementary activities e.g. marketing, production and service activities.

FRA’s Chairman points out that FRA’s BOD decision No. 667 of 2020 allows investment funds to engage in specialized activities through direct investment and setting up and operating manufacturing and service-based projects. Also, the said decision allows investment funds to invest in securities issued by these projects.

FRA’s Chairman says that this decision completes the framework of charitable investment funds, adding that the decision allow them to invest in manufacturing and service-based projects. On the other hand, the decision provides new investment tools through subscribing for investment certificates issued by this type of investment funds.

Dr. Omran  adds that this unprecedented step qualifies financial institutions, including charitable organizations, to employ their assets in a number of projects related to development, in addition to giving them the ability to list securities of these projects  on the Egyptian Stock Exchange in order to benefit from the Stock Exchange as an additional funding platform for their future projects.

Dr. Omran clarifies that recent amendments to the Capital Market Law’s Executive Regulations in November 2018 comes with the aim of facilitating and providing multiple funding mechanisms.  The legislator  grants FRA the right to manage the regulatory process - in full – and  to issue controls for practicing this activity in light of what is permitted by Article 179 of the regulations  which govern  private equity funds that practice venture capital activity or other activities according to the controls issued by the Authority. These amendments will encourage investments related to development such as the agricultural sector for example, allowing direct investment in agricultural lands through the right to use the lands for agricultural development and establishing complementary industries.

Decision No. 667 of 2020 includes integrated controls for practicing specialized activities through direct investment in production and services’ areas. Moreover, the decision includes the most important elements of these funds’ investment policy the most notable of which is the disclosure of specialized sectors targeted for investment and its geographical distribution.

Dr. Omran notes that the controls set certain obligations for Investment Manager, the most prominent of which is preparing a feasibility study for each project the fund intends to invest in, which includes in particular financial, technical, marketing and expected cash flows.

These controls also allow the Investment Manager to seek the assistance of specialized expertise.  In addition, it includes the tasks of Fund Management Companies most notably the periodic evaluation of investment certificates to determine the indicative price of investment certificates. Besides, it states that Fund Management Companies shall keep all documents related to the fund's activity.