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WORKSHOP ON PROPOSED CMA REGULATIONS

Discover the key elements and requirements of the new Lebanese Collective Investment Schemes Regulation under Law 706. Learn about professional investor definition, general requirements, operational compliance, and investment restrictions.

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WORKSHOP ON PROPOSED CMA REGULATIONS

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  1. WORKSHOP ON PROPOSED CMA REGULATIONS The new Lebanese collective investment schemes regulation Sally Buxton Director Cadogan Financial Ltd Khalil Ghalayini Head of Financial Control Unit CMA, Beirut

  2. Proposed new CIS Regulation Highlight key elements and requirements Look at The new Lebanese collective investment scheme regulation

  3. Basis: Law 706 • Policy • Only to cover mutual funds (contractual type funds) • Investment companies to come later • Enable closed ended, open ended and interval funds • Regulate • Domestic funds • Approved schemes for public offer • Exempt offer schemes only for offer to professionals • Foreign funds • Recognised schemes for public offer • Foreign exempt offer schemes only for offer to professionals The new Lebanese collective investment scheme regulation

  4. Definition of professional investor • As in glossary for securities regulatory framework: broadly • CIS or pension fund or similar • Government or public authority • Joint stock company or individual with investible assets of USD 500,000 and minimum of 5 years investment experience • PLUS CIS Regulation requirement • exempt offer must have minimum investment of USD 100,000 The new Lebanese collective investment scheme regulation

  5. Part A – applies to all CIS in Lebanon • Requires anyone offering or establishing a CIS to comply with the Regulation • Requires the entity establishing a CIS in Lebanon to be an approved institution for that activity • Requires the offeror of the CIS in Lebanon to be an approved institution for that activity • Requires an entity offering to deal in foreign CIS units to be an approved institution for that activity • Only allows approved or recognised CIS to be publicly offered • Requires the entity acting as CIS custodian to be an approved institution or Midclear The new Lebanese collective investment scheme regulation

  6. Part B – Applies to all CIS in Lebanon • CIS must be established, offered and operated in compliance with Regulation • Foreign scheme must be offered in compliance with Regulation • Fees relating to CIS to be payable as prescribed by Authority • Persons operating and offering CIS must co-operate with Authority • Same persons must disclose information to enable other parties to operate CIS as Regulation requires The new Lebanese collective investment scheme regulation

  7. Part C - Domestic schemes only • Sets general requirements applying to management and operation of both • Approved schemes (public offer) • Exempt offer schemes (professional offer) • Further more detailed requirements for approved schemes in Part E The new Lebanese collective investment scheme regulation

  8. Part C - Covers The new Lebanese collective investment scheme regulation

  9. Part D – Domestic schemes only • Sets general requirements applying to custody of CIS The new Lebanese collective investment scheme regulation

  10. Part D covers The new Lebanese collective investment scheme regulation

  11. Part E covers only approved schemes (public offer) • Detailed provisions to protect public including requirements for • Approval by regulator of CIS application including requirements for approval • Process and powers of the Authority • Approval by regulator of material changes to CIS • Cancellation of approval and termination of a CIS • Reporting to the Authority The new Lebanese collective investment scheme regulation

  12. Part E - Approved Schemes and Investments • Participation in an approved scheme • Fees and expenses – those permitted, required disclosure of impact • Payment of income • Investment powers – may only invest as permitted and in permitted asset classes • Real estate only for closed ended funds • No use of derivatives • Potential conflicts of interest • Provisions for breaches of investment restrictions The new Lebanese collective investment scheme regulation

  13. Part E – Investments (2) • Permitted borrowing • For open ended fund up to 10% of value of scheme, to meet redemptions only for a maximum of 80 day by way of overdraft • Limits borrowing for closed ended fund to 20% • Closed ended funds, investing in real estate, borrowing should not exceed 60% of the value of the property The new Lebanese collective investment scheme regulation

  14. Part E – Investments (3) • Limits on investment exposure to any one issuer / entity • Conditions don’t apply to; • Lebanese Government securities • During initial offer period • When CIS is under a year old • In case of real estate fund, 15% limit in any single property • Concentration of ownership The new Lebanese collective investment scheme regulation

  15. Part E – Investments (4) • Investment conditions for open ended and interval funds • Indexed funds only (passively managed) • Money market funds and duration limits • Funds of funds and their investments The new Lebanese collective investment scheme regulation

  16. Part E – Approved Schemes • Establishes requirements and responsibilities • CIS prospectus (Annex 1) • Key information document – 2 page user-friendly document (Annex 1) • Annual CIS audited report and accounts (Annex 2) • Audit requirements • Disclosure to unit holders and investors The new Lebanese collective investment scheme regulation

  17. Part E – Approved Schemes (2) • Establishes requirements for • Subscription and redemption • Advertising and promotional materials • Performance calculation • Valuation and pricing (Annex 1) • Meetings of unitholders The new Lebanese collective investment scheme regulation

  18. Part F – Exempt offer schemes • Domestic schemes for offer to professionals • Requirements – • ‘Bare essentials’ - much lighter than Part E approved schemes • Designed to prevent public offer • Can proceed to offer CIS if regulator does not object within 15 days of notification The new Lebanese collective investment scheme regulation

  19. Part G – Offer of foreign CIS • Differentiates offer of • Recognised scheme – for public offer • Must be equivalent to Lebanese approved scheme (no use of derivatives) • Foreign exempt offer scheme – for offer to professionals only • Requires approved distribution agent for both and establishes its duties • Requires Authority to recognise CIS for public offer • Requires notification of foreign exempt offer to Authority - can offer if no objection within 15 days of notification The new Lebanese collective investment scheme regulation

  20. Part I: transitional • Regulation will apply to all newly created domestic or newly offered foreign CIS from date of adoption of regulation • Operation of existing CIS in Lebanon must comply within 18 months • Offering of foreign and domestic CIS must comply from date of adoption • Public offering of foreign CIS not permitted until regulator confirms statusas recognised scheme The new Lebanese collective investment scheme regulation

  21. Reviewed • Proposed new CIS regulation • Highlighted key elements and requirements • Comments or queries The new Lebanese collective investment scheme regulation

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