Egypt's Financial Regulator removes limits on charitable funds' financial investments

EGP 5m maximum to be set aside by such funds to ensure operation continuity: FRA

Mohamed Omran, Chairperson of the Financial Regulatory Authority (FRA), has issued a decision allowing charitable investment funds to invest without a maximum limit.
However, any charitable fund will set aside an amount equivalent to 2% of its total volume, with a maximum of EGP 5m, to ensure it could continue its activities.
This step would encourage the launch of more charitable investment funds and facilitate their work, Omran said. These funds play an important role in supporting and developing social and charitable fields by pumping their investment returns and profits, exclusively, into the activities of registered NGOs or similar public institutions.
This was the case with the National Investment Charity Education Fund, with net assets of EGP 183m, and the ATAA Charitable Investment Fund (ACIF) for supporting the people with disabilities, with net assets of EGP 252m.
This decision does not set a maximum limit on the size of the fund, though, which encourages many founders to launch charitable investment funds without them being obligated to increase the amount set aside when the fund's size reaches its maximum limit.
Omran noted that this step is reinforced by the fact that none of the subscription holders, including founders, receive any returns as a result of investing in the fund, given that the returns are targeted to charitable or social purposes.
Meanwhile, the International Organization of Securities Commissions (IOSCO) does not oblige fund founders to set aside such an amount. It only presented methods to deal with liquidity risks, which falls under the responsibilities of the fund's investment manager, according to the regulations of the Capital Market Law.
On the other hand, the FRA decision stated that investment funds of banks and companies that conduct non-banking financial activities on their own or with others shall not be obliged to prepare annual revenue financial statements. Only financial statements should be prepared (annual and semi-annual) since investment funds disclose the investment value (which represents the financial position of the fund) on a daily or weekly basis, in accordance with the requirements of the fund's prospectus. Moreover, administrative services companies should prepare annual or semi-annual financial statements for investment funds starting from fiscal year 2021/22.