CMA LAW: Resolution No. (2) of 2013 of CMA Board of Commissioners Regarding Regulations of Debt Instruments Funds

Having Perused:

Law of the Establishment of the Capital Markets Authority & Regulating Securities Activity No. (7) of 2010; and
Executive Bylaw of Law No. (7) of 2010 issued on 3/3/2011 and the amendments thereof; and
The CMA Board of Commissioners Resolution No. (1) of 2013 passed in its meeting on 16-17/1/2013 regarding the issuance of the regulations of Debt instruments Investment Funds.
 

 
We Resolved the Following

 
Article One: The issuance of Debt instruments Investment Funds regulations shall be according to the following:

 
Debt instruments Fund:

An investment fund whose main objective is to invest in medium and long term Debt instruments issued by governments, government companies, semi government companies, institutions, private owned entities, or any other body approved by the Authority and rated by one of the recognized international rating agencies, or local rating agencies which are licensed by the Authority to ensure that the fund continuously conducts its tasks as stated in the Articles of Association.

 
Debt Instruments:

Medium and long term investment instruments like transferable and non-transferable bonds and sukuk with fixed or variable yield, treasury bonds, treasury bills (t -bills), or any other debt instruments approved by the Authority.

Investment Guidelines:

Debt instruments Investment Fund, which is offered publicly, is subject to the following rules and regulations:

The fund may not borrow or enter into transactions that may rise its liabilities, except for borrowing to cover redemption applications with a maximum of 10% of the net asset value of the fund.
The credit rating of debt instruments at the time of investment should not be less than (BBB) or the equivalent as laid down by one of the recognized international rating agencies or the local rating agencies which are licensed by the CMA. If the credit rating decreases below the mentioned rate, then the approval of the Authority must be obtained.
The fund may invest 25% as a maximum limit of its net asset value in the debt instruments rated below (BBB) and/or unrated assets by the international rating agencies or local rating agencies which are licensed by the Authority, provided that the single security shall not exceed 5% of the net asset value of the fund without prejudice to the Articles of Association or any other regulations issued by the Authority.
The fund may not own more than 10% of the debt instruments issued by a single issuer, except for the debt instruments issued or guaranteed by GCC governments.
The fund's investment in debt instruments  issued by a single issuer should not exceed 15% of the fund’s net asset value at the initial time of the investment and 20% of the fund's net asset value after the investment time, except for the debt instruments  that are issued or guaranteed by GCC governments.
The fund may invest 15% as a maximum limit of its net asset value in money market funds and/or other debt instruments funds, subject to the fund's Articles of Association or any other regulations issued by the Authority.
The fund may not invest in stocks of both listed and unlisted securities and real estates.
The exceptions of the provisions of Item (7) are the assets that may be owned by the fund as a result of a settlement between the debtors' assembly and the defaulting debt instruments issuer, provided that it notifies the Authority immediately to do the necessary.
Without prejudice to the fund's Articles of Association, the fund shall disclose to the Authority the assets it owns as a result of practicing its implicit right in the transferable debt instruments, and obtain the Authority's approval of a time schedule for selling such assets.
The fund's investments in bank deposits shall not exceed 25% of its net asset value. The Authority may issue exceptions as it deems appropriate according to each case.  

Article 2: This Resolution shall be effective from the date of issue hereof. The existing debt instruments funds shall be granted one year from the date of the issuance of this resolution to adjust their investment accordingly.

 
Article 3: The concerned bodies, each within its capacity, shall execute this Resolution accordingly.

 
Saleh Mubarak Al-Falah
Chairman, CMA Board of Commissioners

Executive Manager

Issued on 05/02/2013 

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