Chazai Wamba An Independent Law Firm based in Douala - Cameroon




Regulation N°1/22/CEMAC/UMAC/CM/COSUMAF on the organisation and functioning of the Central African financial market

14 october 2022

On 21 July 2022, Regulation No. 1/22/CEMAC/UMAC/CM/COSUMAF on the organisation and operation of the Central African Financial Market (the « Regulation ») was adopted in Douala. This new text repeals Regulation No 06/03-CEMAC-UMAC of 12 November 2003.

Long awaited in view of the inadequacies of the texts organising the Central African financial market and made glaring by the constantly evolving practice, the Regulation envisages laying the foundations of a modern and secure financial market.

The Regulation has a different dynamic from the old one and this can be seen in the following innovations:

  • The establishment of new central bodies

The Regulation establishes four (4) central bodies whose mission is to organise, operate and lead the regional financial market within the limits of their powers and responsibilities. These are: the Central African Securities Exchange (BVMAC); the Central Depository; the Settlement Bank, a mission carried out by the Bank of Central African States (BEAC); the Clearing House.

  • The recognition of new financial instruments

The legislator now distinguishes between financial instruments that are financial securities and those that are forward financial instruments.

With regard to financial securities, they include securities (shares and bonds), government securities resulting from the securitisation of the domestic debt of a CEMAC member country, debt securities supervised by the BEAC and Sukuks resulting from Islamic finance.

In particular, Sukuks are a financial product with a fixed maturity that is backed by a tangible asset that confers a claim on its owner. Thus, instead of an interest rate, the owner receives a share of the profit attached to the performance of the underlying asset, which must be lawful.

With regard to forward financial instruments, these include forward agreement, options, swaps, forward rate agreements and all other forward contracts that can be settled by physical delivery or cash, whether or not traded on the regional financial market, and relating to assets, rights or obligations.

The above innovations seem to reflect the legislator’s desire to bring the Central African financial sector into line with international standards for financial products.

  • The institution of new market intermediaries

The market intermediaries now recognised by COSUMAF[1] are the following: brokerage firms, credit institutions, management companies, financial investment advisors, participatory finance advisors, and digital asset service providers.

The financial services provided by these intermediaries are diverse. They include: reception and transmission of orders on behalf of third parties, execution of orders on behalf of third parties, dealing on own account, individual management under mandate, collective management, financial investment advice, placement of financial instruments, advice on participatory financing, listing sponsor activities, canvassing, account keeping for financial instruments, arranging public offerings and private placements, and the provision of services for digital assets

Digital assets refer to crypto-assets and their codification by the Regulation appears to be a logical follow-up to COSUMAF’s various warnings to the public of other market participants.

  • The institution of collective investment schemes

The new Regulation establishes new collective investment vehicles. In addition to Undertakings for Collective Investment in Transferable Securities (UCITS), which are SICAVs[2] and FCPs[3] , alternative investment funds (AIFs) have been introduced, namely securitisation undertakings, real estate investment funds (OPCIs), private equity undertakings and professional long-term investment undertakings (ILOs).

The Regulation also subjects to COSUMAF’s control new structures, including rating agencies. Thus, in order to operate, these agencies will have to obtain an authorisation from COSUMAF.

The purpose of rating agencies is to assess the financial credit risk of an issuer or a transaction involving financial instruments or other financial assets.

In view of the above, it is clear that the community legislator has broadened the scope of COSUMAF’s competence in order to effectively manage the dynamism that characterises the sub-regional financial market.

It should be noted, however, that many of the new measures presented above suggest that a new COSUMAF General Regulation will be needed to define how they are to be applied. This interpretation can be inferred from the many references to the COSUMAF General Regulations, but as things stand, the General Regulations in force (those dating from 2009) do not seem to codify the new measures.

[1] Commission de Surveillance du Marché Financier.

[2] Investment company with variable capital.

[3] Mutual funds.