Mohamed Omran, Executive Chairperson of the Financial Regulatory Authority (FRA), said that the authority has completed the reorganisation of the Investor Protection Fund (IPF) by the auspices of the prime minister. For the first time, the fund will offer insurance coverage for shareholders to hedge against non-commercial risks arising from the activities of companies listed on the Egyptian Exchange (EGX). The development of the fund also included a reduction of fees on transactions by 50% to 0.000010% down from 0.000020%.
Omran said the IPF will provide insurance coverage of the actual financial loss of member clients in the companies operating in the field of securities and financial instruments against non-commercial risks. The coverage also extends to risks of bankruptcy and the defaulting of the fund’s members. The defaulting cases are identified by a decision issued by the IPF’s board. Other risks include negligence or fraud committed by a fund’s member, their legal representative, the people in charge of management, or workers, whether by themselves or in association with others, based on the results of investigations conducted by the FRA or other judicial or regulatory authorities.
The fund also covers the non-commercial risks of company shareholders whose securities or financial instruments are listed on the EGX, including the right for subscription even if the client is delisted before the due date. The risks include damage caused by bankruptcy and final rulings in favour of securities owners that are free trading against the fund’s members in cases of fraud or negligence.
Omran said that the prime minister’s decision has specified that the insurance coverage should be a maximum of EGP 500,000 per client. Compensation shall also include the credit balance of the account resulting from the client’s transactions in the member’s securities and financial instruments, not exceeding EGP 100,000.
He added that the fund is not obliged to compensate for any financial losses resulting from the change in the value of the client’s securities and market financial instruments or resulting from missing investment opportunities by member companies operating in the field of securities and financial instruments.