Egypt’s Financial Regulatory Authority (FRA) has issued the country’s first regulatory framework governing the establishment and operation of hedge funds.
Under a decision by the FRA’s board, chaired by Islam Azzam, hedge funds will be allowed to invest in equities, debt instruments, derivatives such as futures and exchange-traded options, securities borrowed for short selling on the Egyptian Exchange, and other highly traded financial instruments.
The regulator will license funds according to the investment limits and rules set out in their prospectuses or information memoranda. Existing investment funds may also undertake hedge fund activities under specified conditions and convert into multi-issuance funds, subject to updated documentation and board approval.
The new rules require each fund to disclose its investment policy, target investor criteria, leverage limits, risk methodology and management framework. Required disclosures will cover risks including amplified losses, liquidity pressures, margin calls, forced liquidation and market volatility.
Investment managers must provide regular updates to the FRA and investors on leverage, stress-test results, breaches of risk limits, corrective measures and material strategy changes. They will also need specialised expertise and technical infrastructure, conduct counterparty assessments, monitor leverage, test resilience under adverse conditions and verify collateral adequacy.
According to the FRA, the framework is intended to broaden Egypt’s capital market, support the derivatives market and attract new local and foreign investors, while strengthening investor protections.
Source: Zawya
