With reference to the Capital Market Authority Chairman decree no. 14/2007 on capital adequacy requirements of securities companies that aim at boosting their efficiency in their risk management related activities, including market risks, settlement, liquidity, processing and credit, the CMA would like to announce that all related companies have filed capital adequacy forms and submitted them at due dates. The decree became effective as of mid of last April when the companies started to file the forms. When issuing that decree last February, the CMA took into consideration, that a grace period would be given to companies till mid April in order to comply with requirements stipulated by the decree.

The main objective behind issuing those requirements was to open the market for qualified companies to offer new trading services and mechanisms including margin trading and short-selling. The CMA also aims at applying the best international practices in enhancing competitiveness of the Egyptian capital market and its ability to attract more local and foreign investments.

The CMA took into account not to raise the requirements of minimum paid-up capital for different activities of securities companies in order to enable companies to continue their activities. Minimum of net liquid capital will be a percentage of the company’s liabilities and not a fixed amount of money. This would imply that the company would be able to control such amount according to its ability to increase its activities.

The aforementioned requirements will be applicable on securities brokerage companies, bond dealers and custodians.

In furtherance of CMA belief in the importance of applying capital adequacy requirements by brokerage firms, Dr. Hani Sarei El Din issued a decree stipulating that CMA approval on opening new branches or licensing new activities or adding new trading mechanism will be restricted to companies that comply with CMA capital adequacy requirements. Those mechanisms include margin trading, short selling, same-day trading and on-line trading. When applying for such mechanisms, the company shall be committed to submit a certificate from an auditor ensuring correct calculation of net liquid capital and that should not be less than 10% of its total liabilities according to the last report filed at the CMA.

Compliance with these requirements is a quality shift in the companies’ performance in particular and the market in general for they play a major role in protecting investors and in enhancing company efficiency.

Furthermore, the requirements are a step forward in the CMA strategic effort to make the shift from a compliance based approach to risk management based approach.