Financial Supervision Authority: 200,000 citizens invest in gold funds worth EGP 2.1 billion
The Authority confirmed that it regulates investment in precious metals investment fund documents, including gold, and not the direct buying and selling of gold.
The Financial Regulatory Authority stated that, in light of Article 35 of Capital Market Law No. 95 of 1992, it has regulated the dealings of investment managers with metals trading companies permitted to deal with them. This regulation is specific to investment managers licensed by the Authority through the offering of investment fund documents in metals such as gold, and is not a license to deal in precious metals in general.
The Authority indicated, in a statement today, that it had recently monitored calls to buy gold directly, with the implication that metal trading companies are licensed by the Authority, which is incorrect, as the register prepared for this purpose is only for companies permitted to deal with investment managers and does not regulate the dealings of precious metals traders with the general public, which is subject to Law No. 17 of 1999 issuing the Trade Law and the Law on the Control of Precious Metals and Precious Stones No. 68 of 1976 and other relevant laws, which do not include the Capital Market Law issued by Law No. 95 of 1992, which regulates the dealings of investment funds in precious metals, and not direct dealings between metals traders and investors or the general public.
The Authority urged citizens and investors to exercise caution and report any gold trading company that misappropriates the name of the Financial Regulatory Authority, noting that legal action will be taken against such companies. It also emphasized the need for traders to verify the Authority's license for the company against allegations made by companies misusing the Authority's name.
The Authority also stresses the need for investors investing in precious metals other than through investment funds to obtain the metal itself to guarantee their rights.
It clarified that it regulates citizens' dealings in precious metals through investment funds as one of the activities regulated under the Capital Market Law issued by Law No. 95 of 1992.
The Authority has issued several decisions in this regard to protect the rights of traders and the integrity of transactions, starting with issuing controls for investment funds dealing in metals as a transferable security, including conditions that must be met by the metals in which the fund may invest, such as being stamped and having proven ownership, in addition to obligating investment managers to deal in buying and selling metals through trading companies registered in the register prepared for this purpose by the Authority, as well as to seek the assistance of any of the metal storage service providers registered in the register prepared for this purpose by the Authority. The Authority has issued controls for registering and delisting metal storage service providers as a transferable security in the Authority’s register, as well as the conditions that must be met by trading companies that investment managers are obligated to deal with in buying and selling gold.
In light of the above, the Authority has so far approved three gold metal investment funds: the AZ-Gold Fund by Azimut Asset Management, the Al Ahly Financial Investment Management Fund, and the Beltone Evolve Gold Investment Fund. These funds currently have approximately 200,000 investors investing with a total value of EGP 2.1 billion.
The Authority pointed to the legislative and regulatory development of gold investment, through metal investment funds, as the Capital Market Law issued by Law No. 95 of 1929, pursuant to Article 35, allowed investment funds to deal in transferable financial securities such as metals, including the precious metal, which is gold. This was followed by executive decisions, including Decision No. 71 of 2021, regarding the controls for investment funds dealing in metals as one of the transferable securities. The Authority allowed investment funds in the form of joint-stock companies, banks and companies that may practice investment fund activity, either by themselves or with other entities, to invest in metals as one of the transferable financial securities, provided that this is among the purposes of the fund.
The decision also specified controls that must be met by the metals in which investment is permitted, namely that they be stamped by the competent authorities, that they be traded through manufacturers, traders, or other parties that have obtained the necessary approvals, and that their ownership be proven and not subject to legal dispute.
The investment policy contained in the prospectus or information memorandum, as applicable, must include the type of minerals in which investment is permitted, the nature of the revenues targeted for such investment, the minimum percentage of liquidity to be maintained to meet the Fund’s obligations, and the policy for distributing profits to policyholders.
The Financial Regulatory Authority noted that, in all cases, risks associated with this type of investment and how to address them must be disclosed. It also emphasized the need for the fund's assets to be insured by an entity licensed by the Authority.
The Authority also issued Resolution No. 50 of 2023, which obligates the Fund’s investment manager to deal in buying and selling metals through entities registered in the Authority’s register, as well as to seek assistance from any of the metal storage service providers registered in the Authority’s register. Resolution No. 51 of 2023 also stipulates that the Fund’s investment manager must register and delete metal storage service providers as one of the transferable securities in the Authority’s register. The Fund must take one of the forms of companies stipulated in the Joint Stock Companies Law, Limited Partnerships, Limited Liability Companies, and One-Person Companies. Its objectives must include the transfer and storage of funds and metals. It must have obtained the necessary approvals to provide metal storage services from the relevant authorities. It must possess the technical and technological requirements specified by the Authority. The metal storage facilities must be secure and suitable for providing the service.
The Authority also issued Resolution No. 52 of 2023, which stipulates the conditions that must be met by the entities that investment funds must deal with in buying and selling metals in the Authority’s records. These conditions include that the entity must take one of the forms of companies stipulated in the Joint Stock Companies Law, Limited Partnerships, Limited Liability Companies, and One-Person Companies, that its capital must not be less than the limit decided by the Authority’s Board of Directors, which is no less than five million pounds, that its objectives include dealing in buying and selling metals, that it has obtained licenses for this from the competent authorities, that it has no less than two years of experience in practicing the activity, and that it is among the entities that are members of the Egyptian Commodities Exchange, or among the entities registered with the Assaying Authority for Gold and Scales, or any other entity accepted by the Authority.
If the condition of having two years of experience in the activity is not met, its issued and paid-up capital must not be less than 15 million pounds, and shareholders’ equity must not be less than the paid-up capital.
The decision also requires metal storage service providers registered with the Authority to submit an insurance policy issued by a company licensed by the Authority to practice insurance activities against the risks of fire, burglary, loss, damage, breach of trust, and negligence or dereliction of duty by employees.
The Financial Regulatory Authority (FRA) is an independent public legal entity under the Egyptian Constitution of 2014. It was established pursuant to Law No. 10 of 2009 to regulate the supervision of non-banking financial markets and instruments, including capital markets, futures exchanges, insurance activities, and non-banking finance, including real estate finance, financial leasing, factoring, consumer finance, and financing for small, medium, and micro enterprises.
The Authority works to ensure the safety and stability of non-banking financial markets, regulate and develop them, and protect the rights of participants. It also provides the means and systems that ensure the efficiency of the markets and the transparency of the activities carried out within them.
