The Securities and Commodities Authority has given the green light to an annex concerning investment funds, specifically designed for the implementation of the optional alternative system for the end-of-service reward program, known as “End-of-Service Reward Savings Funds.”
This decision, sanctioned by His Excellency Muhammad Ali Al-Sharafa Al-Hammadi, Chairman of the Board of Directors of the Securities and Commodities Authority, delineates that the annex will be appended to the Chairman’s decision No. “1/R.M” of 2023, which addresses the regulation of investment funds. Subscriptions to the end-of-service reward savings funds will be facilitated through a fundamental and/or voluntary subscription amount, adhering to the provisions stipulated by the Council of Ministers’ decision.
Emphasizing that basic subscriptions are exempt from the regulations governing subscription, allocation, redemption, and profit distribution in the investment funds decision, the investment management company must obtain approval from both the Authority and the Ministry before executing decisions related to amendments in the offering document, changes in the investment management company or service providers, fund expiration or liquidation, fund transformation or merger, and the appointment or alteration of the fund’s board of directors.
The end-of-service gratuity savings fund, as per the decision, operates as a public (open) local fund licensed by the Authority for executing the optional alternative system to the existing end-of-service gratuity system. Licensed funds are required to apply one of the investment policies, including the Capital Protection Fund’s policy, serving as a fundamental option for all beneficiaries, and implementing specific policies for skilled and unskilled workers.
The decision underscores the commitment of service providers to furnish the investment policy of the Capital Protection Fund as the fundamental choice. Furthermore, the offering document and subscription form must clearly define the rights and obligations of employers and beneficiaries, along with the terms and conditions of fund subscriptions. Additionally, financial services provided should align with the laws, Council of Ministers’ decisions, or any related directives.
The decision stipulates that investment funds’ total funds and assets managed by the investment management company must not fall below 1 billion dirhams. The Authority may, at its discretion, modify this minimum requirement, provided it adheres to the prescribed investment percentage in local products.
Financial solvency or additional capital must be maintained at a rate not less than 2.5% of the total funds to be invested, with a maximum cap of 50 million dirhams. The Authority reserves the right to amend these requirements at its discretion. Additionally, service providers must demonstrate a track record of at least 3 years in managing investment funds, subject to amendments by the Authority.
Service providers are obliged to present a letter of guarantee amounting to 5 million dirhams in favor of the Authority. The Ministry, in coordination with the Authority, may liquidate the guarantee partially or entirely, contingent upon meeting specified conditions.
The annex further details the obligations of Administrative Services Companies for Investment Funds, necessitating a minimum practice period of 3 years. The Authority, at its discretion and in coordination with the Ministry, may grant exemptions to this period. Additionally, these service providers must furnish account statements and periodic reports to employers and beneficiary workers through electronic means or any method specified in the fund’s offering document. The reports should encompass information on basic and voluntary contributions and their returns during the subscription period.
