Chapter Six1 
Provisions Regulating Portfolio Management Companies
 and Brokerage Companies

Section One 

General Provisions

Article 213

In application the provisions of sections one to five of this chapter means, the word "company" wherever it is stated means "portfolio management companies and brokerage companies" based on the licensed activity for each.  

Article 214

The company shall perform its licensed activities according to the law, Executive Regulations and related decrees, and the conditions and regulations for licensing, and taking into consideration the commercial codes of this field and the principles of honesty, justice, equality and applying due diligence in fulfilling the clients’ interests.

Article 215

The company shall set its internal procedures within one month from the date of licensing.  The procedures should ensure good selection of managers, representatives and employees and verifying the conduct and experience of each in his/her designed job in the light of the conditions set by the CMA in this respect.  The company should not violate any of these conditions and should notify the CMA with a copy of the procedures and incidents of managers or representatives leaving the company.  Company managers mean the Chairman and executive members of the board, and the managers that perform actual management activities.

Article 216

The company should have the needed solvency to perform its activity to ensure its fulfillment of its obligations, in accordance with the rules set by the CMA in this respect. Companies licensed to perform more than one activity should have an independent department for each activity and should separate completely these departments to avoid conflict of interests stated in article (234) hereunder. 

Section Two

Internal Regulations and Supervisory Systems

Article 217

The company shall set internal written regulations before the end of the first from the date of receiving the license.  The internal regulations shall include the company's work system, rules followed by both the managers and the employees.  The company shall provide the CMA with a copy of its internal regulations within one week of ratifying them.  The company shall be committed to amend its internal regulations in accordance with any amendment in the law or its Executive Regulations and to notify the CMA within one week of applying the amendment.

Article 218

	The internal regulations of each company should include at least the following information:
•	The documentary cycle to be followed as of receiving the client's application until the execution of the transaction and the notification of the client.
•	The structural organization of the company showing the actual duties and actual management responsibilities of each manager and company employees representing the company in dealing with others.
•	The relationship between the head office of the company and the branches and the affiliate offices and the extent of activities that may be conducted by the branch.
•	The system of recording the correspondents between the company and its clients.
•	The system of internal bookkeeping
•	The system of recording the clients' complaints
•	The system of internal surveillance and regular check ups of the company which are applied to the managers and the employees to ensure the good application of the laws and decrees regulating the company's activities and its internal regulations and that would result in quick discovery of any violation by any of the managers or the employees.
•	The system of resolving any errors resulting from the company's executing of transactions.
•	The system of dealing with orders of clients that may fail to pay or to deliver securities or any other violation of clients ' commitments and without violating article 262 of the Executive Regulations.

	The company shall notify the CMA of the responsible personnel for the internal surveillance in the head office as well as in the branches and who is subject to their surveillance.

Article 219

	The one responsible for internal surveillance in the company shall keep a file with all clients' complaints related to the company's activities and the procedures taken to resolve these complaints.  He shall verify that all complaints are studied within one week from the date of its submission to the company.  He shall be committed to notify the CMA of any complaint that was not answered within the above-mentioned period.
 
Article 220

	The one responsible for internal surveillance shall notify the CMA with all violations of the law or the Executive Regulations or the decrees issued implementing them or the company's regulations and of any investigation or court verdict issued against any of the company's managers and employees that is related to his work in the securities or a civil dispute related to his work in this field.  He shall also notify the CMA of a bankruptcy verdict, criminal penalty or misdemeanor in a crime related to honor or integrity.  The notification should be within three days of his knowledge of any of the above.

Section Three

Advertisement

 Article 221

	Each advertisement published by any company should be characterized with honesty and accuracy.  It should include all data required for disclosure or that is considered necessary with respect to the subject of the advertisement and the nature of the target public to ensure their understanding of the advertisement and their ability to evaluate the subject matter.  The company is prohibited from hiding any critical information or data in a way that can influence the clients or any of the target public decision making process or may result in misinforming or confusing them.  The advertisements should not include any exaggerated statements or misinforming statements.

	Advertisement means addressing the public with information or data published or circulated through any means and at any occasion.  The means could be audio or visual whether local or foreign, written or announced or transmitted by any electronic means or any other means.  The public means the persons that are not previously determined and who have no previous relationship with the company, its manager, or employees.

Article 222

	The company shall be cautious and accurate in conducting its activities.  The company shall be prohibited from performing any of the following activities;
•	Receiving any fees or return of any kind or requesting a specific actions from clients in return for services that the company announced were freely provided
•	Using cautioning phrases with regard to any securities without reason, if that involves a kind of misinformation.
•	Concealing any important differences when comparing different securities or performance of different companies.
	
Article 223

	Advertisements for offerings or sale of securities or reports or researches published with respect to securities or their market or the issuing companies should be include the name of the entity that prepared the advertisement or the research and the date of its publication for the first time (if it was published more than once), in addition to principal financial data of the issuing company in accordance with the rules set by the CMA.

Article 224

	The company shall be committed to verify the validity and accuracy of the information and data included in its advertisements and to make sure not to repeat the advertisement without verifying that the information in it is still valid each time the advertisement is published or announced or presented in any other way.  The company shall specifically verify the prices of securities mentioned in the advertisement and indicating whether it is closing prices, or trading prices or nominal values.

Article 225

	The company, and its managers or employees shall be prohibited from advertising the company's receipt or their receipt of any prize or certificate of any kind except after verifying that the provider of this prize or certificate was not paid for it and the advertisement should indicate the source of prize or certificate.  In all cases, the advertisement should include an explanation that the award of the prize or the certificate reflects only the opinion of the provider of it and does not ensure any financial returns.
  
Article 226

	The company is prohibited from advertising the presence of research units or its ability to perform technical studies related to securities in case they are not actually available.  If the advertisement includes any data or charts or graphs or figures or any specific information, the advertising company should disclose the source of information unless the company itself has prepared it.

Section Four
 
Company Information and the Right to Information 

Article 227

	The company shall keep on-time books that show its financial situation, its accounts, records, documents, and correspondence in accordance with the law and the applicable regulations. The company shall also send its clients upon request its regular financial data based on the most recent authenticated financial statements.

Article 228

	The company shall keep a list of all its clients and a file for each client including the data stated in the following article and statement of all the securities traded on his behalf and contracts signed between him and the company, as well as the correspondence between them for at least a two - year term.

	The client means any physical or judicial persons that the company opened an account for or contracted with for dealing in securities, whether or not it actually executed the transaction.

Article 229

	Each client's file with the company should include at least the following information:
•	Client's name, age, profession, address and a photograph. If it is an Egyptian judicial person he should give a copy of his commercial registration, his legal status and if it is a foreign judicial person an establishment document and the legal status.

•	Client's address for the correspondence and the telephone numbers.
•	Names and titles of those who have signature rights on behalf of the client or can represent him with the company.
•	A copy of the documents that prove the client's identity or his representative of the family identification card in which the minors are registered.
•	Statement indicating if the client is another company working as portfolio manager or as a brokerage firm or whether he or she is a manager or an employee or a shareholder in one of those companies.

Article 230

	The company shall protect the complete secrecy of the client's information and shall not disclose any of his information or his transactions to others without a previous written consent with the exception of cases that necessities providing specific information to the Stock Exchange or supervisory entities or courts and in accordance with the laws.  The company shall take necessary procedures that ensure the commitment of the managers and employees to protect the secrecy of this information in all cases.  The company shall be prohibited from using this data and information to acquire any private profits for itself or to any of its other clients without receiving a previous, written consent from the possessor of the information and data.

Section Five

Conflict of Interests and Use of Information

Article 231 

	The company shall abide by the principles of honesty, working in the client's best interest, equality among clients with similar nature and conditions in dealing with the company, avoiding all things that entail providing favors or incentives or special information to some clients and not the others whether directly or indirectly.  The company shall also be prohibited from any action that may result in harming any of its clients.

Article 232

	The company shall be prohibited from dealing in the client's securities through another company working in the same activity and subject to the regulations of this chapter and that is subject to the actual authority of the same physical or juridical persons in the execution of a transaction that was ordered to the two companies or that was ordered during the suspension of the company or to conduct excessive transactions. 
It is considered to be an excessive when executing or inventing deals with the objective of increasing the brokerage commissions or any other fees or costs.    

Article 233

	The company while practicing its licensed securities activities shall avoid the emergence of any conflict of interests.  It shall not indulge in any activity that involves this conflict except after disclosing the conflict to its clients or the public that can be affected by this conflict in its decision-making with respect to dealing in securities and after receiving a written approval from the person who has the deal in his name or account.

Article 234

	Conflict of interest means all situations that may result in conflict between the company's interests or any of its managers or employees' interest and the client's interest while conducting its licensed activity.  It may also mean the conflict of interest between clients that the company handles their transactions in a way that may result in favoring the interest of one client over the interest of another, or may affect the company's neutrality whether in conducting or refusing to conduct the work, or in providing opinion, or in behavior that results in affecting the decision of clients or the public.

Article 235

	The company's shareholders, managers and employees, in case of managing or participating in the management of another company working in the same field subject to the regulations of this chapter, shall completely separate each company and to ensure that no conflict of interest between the two companies or between any of them and the clients of the other company.

 Article 236

	The company shall be prohibited from dealing in securities in the name or at the account of its managers or employees or their relatives to the second degree or those who are their commercial partners or those whom they provide for.

	However, if it is a brokerage firm, it may deal with any of those above mentioned through a personal account with the company and upon a written clear approval from the company's board of directors.

	The provisions in the previous paragraph shall be applicable to portfolio management companies on condition that the executive manager approves that one brokerage firm executes all transactions to the individuals mentioned in paragraph one of this article including the sale and buy orders given by them.

Article 237

	The company shall be prohibited from dealing in securities in the name or at the account of the managers or employees in another company in the activities subject to the provisions of this chapter except after verifying that those persons are following the conditions mentioned in the previous article.

Article 238

	The company shall be prohibited from dealing in the name or for the account of the shareholders of any company subject to the provisions of this chapter except after notifying the board of directors of the company that executes the transaction.

Article 239

	Shareholder means in applying articles 235 and 238 each shareholder in the capital of any of the companies subject to the provisions of this chapter with exception of those whose share is less than 5% of the capital and that has no actual authority in management.

Article 240

	The one responsible for internal surveillance in a company shall examine the buy and sell orders in accordance with articles 236, 237 and 238, before their execution to ensure that they do not contain any conflict of interests.  The orders shall be executed after the execution of the clients' orders on the same securities with the exception of public subscriptions.

	The company shall keep a private register for the account of the managers and employees in it, showing the transactions executed in their interest.  
 
	In all cases, the company shall be prohibited from executing sell or buy orders for the account of one of its managers or employees in a marriage transaction where the counter part is one of its clients.

Article 241

	The company shall notify its clients in writing of any of the following and request a written approval previous to executing the activity:
•	The existence of a personal and direct interest for the company in marketing the security subject of the transaction.
•	The involvement of the company in the offering of the security under consideration for subscription in the previous year to the transaction.
•	That the company and the company issuing the security under consideration are subject to the actual authority of the same physical or judiciary persons.

Article 242
	
	Any of the managers or employees of the company shall be prohibited from presenting gifts or grants to any individual who has a work relation with the company with the aim of influencing the trading price of securities in any manner or with the aim of conducting or not conducting a certain activity or stating an opinion that may lead to that effect.  It shall also be prohibited for any of them to present or accept gifts of any kind that exceeds LE 100 or whose total value in the whole year exceeds LE 500, whether it is direct or indirect, from or to any physical or judiciary person that has any interest with company.  Managers and employees in the company shall submit a regular report of the gifts he presented or received and their value during the period covered by the report.  In all cases any of them shall be prohibited from accepting gifts of any kind and any value from those dealing with the company if the aim is to influence the neutrality of their behavior.

Article 243

	The company shall be prohibited from using any methods in its work that entails fraud especially:

•	Establishing illusory accounts with the aim of conducting dealings that would not have been conducted without them.
•	Conducting dealings on the account of the client or in his name without a permission or delegation or disregarding the delegation.
•	Spending from the client’s money on personal activities for the company or for any of its managers or employees.
•	Concealing or changing or abstinence from disclosing material facts related to dealing on securities.
•	Mortgage or borrowing using the clients' personal securities as a collateral

I.	Article 244

	The company or any of its managers or employees shall be prohibited from dealing in securities on which they have information or data that is not announced in the market or not available to all those dealing in this security, even if the information is incomplete or related to an expected transaction in this security or any other thing of substantial influence on the securities or the issuing entity or on the trading prices.

Section Six

Special Rules for the Portfolio Formation                                       & Management Companies

Article 245

	The company, in the context of applying the provisions of this chapter, shall mean portfolio formation and management companies.

	The company shall be prohibited from promising in any advertisement it issues a specific financial returns for dealing in any security or emphasizing any of its predictions or anticipating that previous profits shall be repeated or implying any of the above. 

Article 247

	The company shall send at least a detailed quarterly statement of accounts to each client and a final report at the end of the contract, to his permanent address as mentioned in his file or according to his instructions.  The final report should include at least a list of executed transactions and the client’s holdings of securities and his cash account during the period covered by the report.

Article 248

	The company shall writ a contract with each client including the form of dealing between them and the extent of freedom the company shall have and all responsibilities and duties of each party in compliance with the law and its regulations.  The company shall prepare a form of the contract with its clients and shall send a copy to the CMA.  The contract shall include in addition to the data mentioned in article 229 the following:

•	The company's commitment to buy and sell securities in the name and on the account of the client.
•	Defining the client's investment objectives and the conditions.
•	Defining the extent of risk and securities liquidity the client is willing to bear.
•	Defining whether the client is willing to buy foreign securities.
•	The company's commitment to provide maximum diligence in achieving the client's objectives.
•	Defining the company's commission for the services provided.
•	The names of banks or companies in which the client's securities, the liquid money for buying securities and the cash resulting from the sale of securities are deposited and the money devoted for buying securities and the conditions of dealing on these accounts.
•	The method of settling or resolving disputes that occur between the two parties while applying the terms of the contract.

Article 249

	The company is prohibited from conducting the following:
1.	Payment of client's profits that are not as a result of real transactions or exceeding the actual profits of the transactions
2.	Providing the client with a guarantee against losses resulting from dealing in securities in cases not allowed by the CMA.

Article 250

	Without violating the central depository system, the company shall deposit the client's securities and the money determined for buying securities or money resulting from sale of securities in one of the banks in the name of the client or with one the licensed companies for such activity.  The account shall be in the name of the client alone.  It is allowed to deposit it in the client's name in a pool fund while completely separating the client’s accounts' from the company’s private accounts.

Article 251

	The company shall be prohibited from using the client's money to finance its private transactions or to spend it in any of the company's accounts.  The company shall also be prohibited from dealing between its own portfolio and that of the client whether selling or buying.

Article 252

	The company may deal on its securities account, not exceeding 75% of the net shareholders equity and in accordance with latest certified budget while taking in consideration having the appropriate working capital.  Priority is given to execute clients' orders and realize their interests.  The company shall keep a record for all executed transactions for its account.  The company shall be prohibited from executing any transaction in which the company is one party and the client is another.

Article 253

	Without violating provisions of article 231, the company shall avoid buying or selling securities that it expects to be profitable or expects an increase in its prices on the account of some clients and not others, or at the account of all clients but at excessively varying rates.

Article 254

	The company or any of its managers or employees shall be prohibited from conducting transactions on securities with the aim of influencing its price or depending on researches or reports that will be published on these securities.

Section Seven

Special Provisions for Brokerage Firms

Article 255
	
	The company in the context of applying the provisions of this section means brokerage firms.

Article 256

	The company shall sign an agreement with each client including the form of dealing between them and all responsibilities and duties of each party in compliance with the law and its regulations on a prepared form for this purpose. The company shall send a copy of the form to the CMA.  The agreement will include in addition to the data mentioned in article 229 the following:

1.	The company's commitment to buy and sell securities in the name and on the account of the client.
2.	Defining the client’s investment objectives.
3.	Defining whether the client is willing to buy foreign securities.
4.	The company's commitment to provide maximum diligence in executing the clients' orders.
5.	Defining the company's commission for the services provided.
6.	Defining the agreed upon method for correspondence between the two parties and in submitting the client's orders to the company.
7.	Defining the custodian.
8.	Defining the method of settling or resolving disputes that occur between the two parties while applying the terms of the agreement.

Article 257

	The company shall be committed to the rules set by the Stock Exchange and the trading system. It shall also be committed to conduct its activity in accordance with the system set by the exchange for company's membership.

Article 258

	Without violating the provisions of articles 221 and 226, the company shall be committed when giving advice to clients on dealing in securities to take into consideration that the recommendations are appropriate to the needs of each client and his financial status, his experience in dealing in the securities market and all his other circumstances based upon the information provided by the client to the company and that is included in the agreement to open an account or whatever is apparent.  The company shall be prohibited from providing advice to its clients to sell or buy securities unless it has researches on the security or on the market that justifies the advice.  In all cases, none but the employees and specialized managers in the company shall be allowed to provide this advice.  The company shall provide available data on securities to whoever requests it from the clients.

Article 259

	The company shall be prohibited from the following activities;
•	To deal in the client's securities in a manner that conflicts with his interests or his financial status.
•	To recommend buying securities with high risk undertaking the maximum diligence to verify the appropriateness of such recommendation with the client's circumstances.
•	To recommend buying securities that exceeds the client's financial capability to meet the obligations.

Article 260

	The company shall do the maximum diligence to get the best selling and buying prices for its clients at the time of execution and without failure to meet their orders.

Article 261

	The company shall ensure that the executed transactions are in compliance with the law and all decrees implementing it, especially with respect to the client's identity, his ownership certificate of the securities, his nature, his competence to dispose of the security and that dealing is on an intact security, in a way free of fraud or exploitation or illusionary speculations.

Article 262

	The company shall not be allowed to execute sell or buy orders except after making sure of the existence of the security, subject to the order, in the sellers custody or that it is deposited in his name in the central depository, and after verifying the buyer's ability to pay the price whatever the nature of the client whether physical or judicial person.  In all cases, the company shall guarantee payment of securities prices both for its clients from its private money if upon request; it became apparent that the client did not pay.    

Article 263

	The company shall enter the buy and sell orders in the computer connected to the Stock Exchange through the prepared means, in accordance with the clients' instructions and the in compliance with the law, the executive regulations and the systems used.  The company's representative in the Stock Exchange shall keep register to record the orders received from the company during the trading session. The register shall include the same information recorded in the clients orders register with the company.  It shall not be allowed to execute any transaction not recorded in the clients orders register.  The company may take the orders by phone in accordance with the telephone recording system prepared by the company and approved by the CMA to ensure no fraud or manipulation and on condition the client approves in writing.  In all cases, the company's advice to the client cannot replace receiving clear orders from him to buy or sell.

Article 264

	The company shall complete the procedures for conducting the transaction; notify the exchange and the clearing and settlement company of the execution within the specified legal time. The company shall notify the client within 24 hours of executing the transaction.  The client's notification shall include a detailed statement of what was traded in money and securities and the discounted commissions, without jeopardizing the company's responsibility to send periodical statements to the client.

Article 265
	The company shall be committed to complete the procedures of delivering the securities in case of sale and completing the financial settlement of the transactions executed during the specified legal time in accordance with the systems set by Misr for Clearance, Settlement and Central Depository, in this respect. The company may keep the securities of the clients in its premises with the approval of the CMA and in compliance with the regulations and conditions set forth by the CMA.

Article 266

	The company shall execute the orders of the clients within the limits order.  The company shall not be allowed to go beyond these limits while selling or buying of securities. Also the company may not execute transactions at prices or quantities more or less than the client's orders.

Article 267

	The company shall comply with the licensed central depository regulations and shall notify the client in writing to come to receive the securities bought in his account and the company shall keep in its records a copy of this notification.  The company shall keep the securities in a safe place until the client receives it or until he gives a sell order or until deposited with a licensed entity for this purpose and in accordance with its agreement with the client.  The company shall take all necessary procedures, including insurance of the premises against robbery and fire or any other risks, to safeguard the clients' securities held in its custody until the execution of the orders or until delivering it to the clients or depositing it with licensed entities.

Article 268

	The company shall not be allowed to intentionally refrain from putting an offer or bid requests for securities to move prices or to agree with any party to conduct transactions that give the impression of the availability of offers or bids for these securities.