Other services
Dollar repatriation service
One of the obstacles facing the attraction of foreign investment to the Egyptian stock exchange is the transfer of the sales proceeds of foreign clients and the associated profits in foreign currency.
Therefore, MCDR in collaboration with the Capital Market Authority and the Central Bank of Egypt developed a new mechanism to transfer the value of these transactions. The system has been implemented in collaboration with MCDR, National Bank of Egypt, Misr bank, custodians who deal with foreign clients and the Central Bank of Egypt.
The system has been designed so as to be accurate and to prevent draining of foreign currencies where repatriation is effected only according to the operations of sales or profit disbursement.
Mechanism of dollar repatriation system:
The local Custodians who deal with foreign clients open two accounts in the clearing bank, one in local currency and the other one in Dollar. In case that the foreign client wishes to transfer the transactions value into US dollars, MCDR feeds the dollar account of the Custodian bank which in turn adds the transaction value in Egyptian pounds at the clearing bank. Then the custodian bank transfers the amount to his client.
Methods of repatriation for the foreign investors according to their order:
In Trading day
The selling broker will notify the foreign investor on the execution of the transaction.
In day T+1
The foreign investor will hand over the delivery orders to the Global Custodian who will give his instructions to the local custodian to undertake delivery.
In day T+2
The custodian will transfer the securities to the account of the brokerage company in order to finalize the settlement.
In day T+3
Eight o’clock in the morning:
Finalization of settlement in MCDR by Delivery Versus payment between the seller and the buyer.
8:30 AM
MCDR sends the cash settlement instructions to the clearing bank in order to finalize debiting and crediting to and from the brokerage companies’ balances.
12 Noon:
According to the foreign clients’ request, the custodian sends the details of the transactions to be transferred to foreign currency to MCDR in the same day. A list of foreign clients wishing to do the transfer should be attached.
Before 2:00 PM:
MCDR reviews the details of the transaction as in its database (unified code, name of the client, executing broker, transaction number, the security, quantity and total value in Egyptian pound)
2:00 PM:
MCDR will notify the clearing bank on the transfer to the foreign currency according to the data sent by the transferring custodian.
In (T+4)
1. The broker will transfer the total value of his transaction in local currency equivalent to foreign currencies to his account in Egyptian pound in the cleaning bank.
2. The broker will notify MCDR to add the value of the transaction to his personal account in the clearing bank in local currency.
3. The clearing bank will effect the necessary transfers to feed the foreign account of the custodian and to notify MCDR on the completion of the transfer.
4. The custodian will transfer the foreign currency to global custodian according to the request of his clients.
5. The custodian submits to MCDR a notice on the completion of the transfers of transaction value of foreign investors.
Global Depositary Receipts (GDRs)
It is a financial instrument marketable in the international financial markets issued by one international financial institution or international banks according to an agreement with a local company in exchange of deposit of the companies securities at the depository or issuing bank. Thus these receipts will be traded as a replacement for original securities and allows the holder to retain the right to get the dividends of the original securities:
The advantages of GDR:
• Expansion of shareholder base.
• Provide a more flexible finance instrument in the future.
• Provision of a relatively higher liquidity.
• A good opportunity to publicize the activity of the company in international markets .
• Effective method to disseminate the data of the company in international markets.
• GDR is well traded in international markets.
• The instrument is traded freely in the capital markets.
• Issued and priced in US dollars to protect clients from the risks of currency fluctuations.
• A suitable instrument to invest in new financial markets.
• The investor will benefit from the merits of offering GDR in international capital markets; easy settlement and clearing procedures, high degree of transparency, easy trading and liquidity.
Types of GDR
ADRs, American depositary receipts issued by American banks to the financial markets in exchange for securities. These are registered by the Securities and Exchange Commission.
GDRs Global Depositary Receipts, those certificates issued and circulated in more than one financial market particularly in the European markets. It may also be traded according to certain conditions in different financial markets.
Parties to the GDR
Five main parties:
Issuing company.
Local agent.
Issuing or depositing bank.
Issuing management bank
Investors.
How the GDRs are deposited through Bookkeeping Company
• The local agent of the depositing bank will receive the instructions to transfer GDR from the overseas depositing bank. The instructions include the transferor and the transferee, the security and the amount and the transferee bookkeeping company.
• The local agent of the issuing bank will issue the instructions and send it to the Egyptian stock exchange in order to transfer ownership of the securities to the new client, the instructions will be sent to the bookkeeping company holding the securities to record an order of portfolio transfer for GDRs.
• The Egyptian stock market will issue ownership certificates.
• The transferring bookkeeping department will issue a delivery order to be delivered electronically to MCDR to complete the transfer.
• The transferee bookkeeping department will send a letter to MCDR showing the data of GDR, unified code of the other investor and the transferring bookkeeping company to transfer the amounts to transferee bookkeeping company.
• MCDR will transfer the amount to the transferee bookkeeping company.
• The transferee bookkeeping company will receive the transfer process, do the required allocation, and hence send it electronically to MCDR in order to deduct the balance from the transferring bookkeeping company and add the balance to the transferee bookkeeping company.
• After the settlement, the bookkeeping company will issue an account statement for the client.
• The same procedures will be used in cancellation of GDRs.
Distribution of Securities legacy
By virtue of the amended article (18) of the Capital Market Law 95 of 2000, the provisions of Central Depository and Registry Law # 93 of 2000, the Legal Department of MCDR will transfer the ownership of the inherited securities according to the followings procedures:
The beneficiary will submit an application along with the followings documents:
1. A recent statement of account issued by the bookkeeping company holding the deceased balance.
2. An official copy of the inheritance declaration.
3. A copy of the custody decision in case of minors.
4. Id cards of the beneficiaries.
The balance of inherited securities will be verified.
The concerned lawyer will undertake the necessary relinquishment procedures between the beneficiaries.
The legacy will be distributed according to the inheritance declaration, inheritance law and the will. The binding will, endowment and gifts shall be taken into consideration and the relevant dividend will also be distributed.
Pledged securities will be distributed separately for every creditor pledgee, a letter will be issued to the securities pledge departmental the bank which will address the pledgor bank.
The department will issue a letter containing the different shares to the bookkeeping company holding the deceased balance (the legacy). A copy of which should be delivered to the Shareholders list department and coupons payment department at MCDR.
Procedures followed for securities registered in the Central Depository (CD) and not deposited: -
a- Natural persons
b- Juridical persons.
For Natural persons:
One of the beneficiaries or his proxy will undertake the following procedures:
An application will be submitted to distribute the material securities legacy of the deceased (form no.)
The following documents should be attached to the application:
1. Original of the material securities to be distributed.
2. An original copy of the inheritance declaration after perusal on the original.
3. Copy of the custody decision, after perusal on the original in case of minors.
4. Copy of the ID cards of the beneficiaries.
5. Copy of powers of attorney while presenting the original for review.
The Inheritance Department will receive the legacy securities and the attached documents. It will then issue a certificate for each beneficiary (form No.) including his share of the securities according to the inheritance declaration. The following should be taken into consideration:
1. Rounding the fraction in shares of securities through agreement between the beneficiaries.
2. Every beneficiary or his proxy will receive a certificate for the Securities he owns in order to go to the Bookkeeping Company to deposit the securities in the Central Depository.
For the Juridical person
The representative of the juridical person, or his legal representative or one of the shareholders, the representative of the legal liquidator or the direct trustee will execute the distribution as follows:
• An application to be submitted to the legal department- inheritance section to divide the material securities owned by a juridical person (form # ). The following documents should be attached:
1. Original of the material securities be divided.
2. A true document indicating liquidation or termination of the company.
3. Certified copy of the commercial register while presenting the original for verification.
4. Copies of the commercial agencies if any and originals for verification.
5. Certified copy of company’s by-laws.
• The Inheritance Section receives the original of the inherited securities and the documents referred to, it will then issue a certificate for each shareholder or his successor according to the share in the terminated company. The following should be taken into consideration:
• Rounding the fraction in the securities shares through agreement between the shareholders.
• Every beneficiary or his proxy will receive a certificate for the Securities he owns in order to go to the Bookkeeping Company to deposit the securities in the Central Depository.
MCDR will issue letters to securities issuers concerning the damaged or missing securities that require replacement, indicating whether these securities are deposited or pledged. The same also applies for inherited securities as the MCDR mandate includes only the securities deposited at the central registry.
Replacement of missing / damaged Securities
The owner of the security or his legal representative submit an application for issuing a replacement for the lost securities after following the procedures below:
• To notify the police on the lost securities indicating the relevant numbers, categories and names.
• Submit a receipt proving the suspension fees from Cairo and Alexandria stock exchanges.
• An inquiry should be made on whether such securities are registering in the central depository or not.
1. In case the required security is registered at the central depository, a search should be made to identify whether the securities have been deposited before by the owner (the applicant for replacement) or not.
2. In case the required security is not registered, then the legal department will verify if the applicant is the last owner, trading will be suspended on the original number then a letter will be issued for the issuing company to issue a replacement on a form developed for that purpose.
• If the securities have not been deposited or traded during the period from 1/10/1996 (date MCDR started its operation) till the date of inquiry, the issuing company will be contacted to inquire about the last owner of the securities as per its records. Procedures will then vary according to the issuing company’s response.
• The issuing company will deliver the replacement of the lost securities to the legal department at MCDR to be deposited after the shareholder chooses the bookkeeping company he wants to deal with.
Procedures of issuing replacement of damaged securities:
The owner of the securities or his legal representation will submit an application to issue replacement for damaged securities:
• The owner will submit the damaged securities to the company.
• An inquiry will be made in the database of MCDR on the name of the last owner of these securities.
• If it has been proved that applicant is the original owner, then the securities will be received from him, stopped and then a replacement will be issued on the prescribed form after payment of due charges.
• If the inquiry indicated that the applicant is the owner of the securities, MCDR will receive the securities and a replacement will be issued on the form specially developed for this purpose after payment of the required fees.
• If the inquiry indicated that the applicant is not the last owner and that the securities have been traded during the MCDR’s period of operation, the securities will be kept, and a relevant thorough investigation will be made. The official authorities, including the Capital Market Authority, will be notified.
• If the securities have not traded during the MCDR period of operation, the issuing company will be contacted in order to verify that the applicant is the original owner of the securities as per to its record.
It is worth to note here that MCDR’s mandate regarding issuing replacement for lost securities is for those registered in the central registry or not registered, deposited or not deposited.
Regarding the replacement for damaged securities, it is only limited to securities registered in the central depository system
The database of MCDR will be interviewed looking for the last owner of these securities.
If it is proved that applicant is the original owner then the securities will be received from him, stopped and hence a replacement will be issued on the prescribed form after payment of due charges.
If it has not proved that applicant is the original owner and that the securities was circulated during the term of MCDR, the securities will be kept, the case of the securities will be checked, the official authorities will be notified including the Capital Market Authority.
If the securities are not circulated during the term of MCDR work, the issuing authority will be notified in order to verify that the applicant is the original owner of the securities according to its record.
It is worth to note here that the responsibility of MCDR in issuing all types replacement for lost securities if it was registered in the central registry or not registered, deposited or not. Regarding the replacement for spoiled securities, it is only confined to the securities registered in the central depositary system.
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