Mehrdad Farahabadi May 2012 Structure of Financial Markets in Iran Capital Market Financial Market Structure of Financial Markets in Iran Money Market Department of Supervision on Financial Institutions ID: 1028333
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1. Islamic Mutual Funds in IRAN Mehrdad FarahabadiMay 2012
2. Structure of Financial Markets in IranCapital MarketFinancial MarketStructure of Financial Markets in IranMoney MarketDepartment of Supervision on Financial Institutions
3. Department of Supervision on Financial Institutions Financial Market StructureMoneyMarketCapitalMarketFinancial MarketOrgansOrgansSecurities & Exchange High CouncilSecurities & Exchange Organization(SEO)Money & Credit CouncilCentral Bank
4. Money MarketCentral Bank of Iran(CBI)BanksCreditInstitutionsLeasing CompaniesExchangesQard al Hasan InstitutionsDepartment of Supervision on Financial Institutions
5. Capital MarketSecurities & Exchange Organization (SEO)Security ExchangesFara BourseMarketOther Companies(Tehran Securities Exchange Technology Management Co)AssociationsFinancial InstitutionsDepartment of Supervision on Financial Institutions
6. Fundamental Capital Market ActsDecember 20103Development ofNew Financial Instruments and Institutions Act June 20072Implementary By-Law of Securities Market ActNovember 20051Securities Market ActDepartment of Supervision on Financial Institutions
7. Supervising Financial InstitutionsGranting Permission to The Financial Institutions Preparing related Guidelines & CircularsDepartment of Supervision on Financial InstitutionsTriple ActivityCyclesDepartment of Supervision on Financial Institutions
8. Minimum CapitalProfessional Competence of members of the board of directorsSubject of Activity as per Articles of AssociationActivity PermitEstablishment PermitFinancial Statement(Including Interim & Annual)Trial Balance & Special ReportsCorporate GovernanceAuthorities of SEO Department of Supervision on Financial Institutions
9. Investors(Individual & Entity )One year Return of Tehran Stock ExchangeValue (million Dollar)DescriptionRaw5,000,0009 %135,000 Tehran Stock Exchange & Fara Bourse Market1Capital Market(May 2012)Department of Supervision on Financial Institutions
10. Defined byFinancial InstitutionRawSecurities Market ActBrokers1Securities Market ActBroker/Dealers2Securities Market ActSpecialists3Securities Market ActInvestment Advisors4Securities Market ActRating Agencies5Securities Market ActInvestment Mutual Funds6Securities Market ActInvestment Companies7All Defined Financial Institutions in ActsDepartment of Supervision on Financial Institutions
11. Authorized byFinancial InstitutionRawSecurities Market ActFinancial Data Processing Companies8Securities Market ActInvestment Banks9Securities Market ActPension Funds10Implementary By-Law of Securities Market ActCentral Securities Depositories & Settlement Companies11Implementary By-Law of Securities Market ActHolding Companies12Implementary By-Law of Securities Market ActPortfolio Managers13Securities & Exchange High CouncilConstruction Funds14The Law for Development of New Financial Instruments and InstitutionsSpecial Purpose Vehicle (SPV)15Department of Supervision on Financial Institutions All Defined Financial Institutions in Acts
12. Definition : The Law for Development of New Financial Instruments and Institutions: Mutual Fund means a financial institution which invests the financial resources derived from issuance of investment units in its designated area of activity.Mutual Funds Objectives :The purpose of forming the fund is to pool monies from investors and invest them in the purchase of securities of all kinds (as defined in prospectus) so as to mitigate the investment risks, exploit the economies of scale and protect the interests of investors. Department of Supervision on Financial Institutions
13. Kinds of Mutual Funds In IranKinds of Mutual Funds In IranSecurities Mutual FundsConstruction FundsETF Gold Funds(Regulations will be prepared in near future)Charity FundsCurrency FundsDepartment of Supervision on Financial Institutions Stock Mutual FundsMixed Mutual FundsIndex FundsFixed Income Mutual Funds
14. Mutual Funds BodiesPreferred Investment unit HoldersSupervisoryExecutiveAssemblyManagerRegistrarTrusteeAuditorGuarantorBrokerto examine the principles and procedures of internal control exercised by the manager or the trustee in the discharge of the duties prescribed in the articles of association and comment on the adequacy or weakness of such principles and procedures and make recommendations to remove the possible deficienciesto examine and express his opinion on the following issues about the accuracy of calculating the market net assets value, statistical value, the issuance and redemption price of investment units to examine and express his opinion within the prescribed time-limits about fund's financial statements in accordance with auditing standards and with a view to the national accounting standards to examine and express his opinion about the accuracy of the reports of the fund manager concerning the fund performanceto conduct an investigation to ensure that the principles and procedures of internal control designed for the discharge of manager’s and trustee’s duties are applied in practice and prepare the necessary reports in this respectDepartment of Supervision on Financial Institutions
15. CharacteristicsExploiting Economies of ScalesProfessional management On Line Supervision Guaranteed LiquidityInformative Websiterisk mitigationInformation Dissemination Attributes & Benefits of Mutual FundsDepartment of Supervision on Financial Institutions
16. Net Asset Value per unitCashLiabilitiesOutstanding UnitsOther Assets++-The current value of principal & interests of fixed income securitiesSum of the following at : Bank accountsShort term deposits at banksCertificates of deposits Includes : Reciprocal accounts with brokersDividend ReceivablesDiffered chargesNAVIncludes : provisions for organs feeprovisions for liquidation Accounts payable to brokersOther payablesFixed Income SecuritiesMarketable Stocks+NAV CalculationDepartment of Supervision on Financial Institutions
17. Entity InvestorsIndividual InvestorsLast year Return(Average)Value (million Dollar)QuantityDescriptionRaw3283626714%32958StockMutual Funds13202716518%116217Fixed Income Mutual Funds266107012%73Mixed Mutual Funds35551.5%41Index Fund471964557__150279TotalMutual Funds In Action(up to the April 01,2012)Department of Supervision on Financial Institutions
18. Disciplinary ProceduresMethods of SupervisionInternalSupervisory BodiesExternalSEOContinuousSoftware (On line supervision)PeriodicallyVisiting Mutual FundsAuditingTrusteeCheck ListsDepartment of Supervision on Financial Institutions
19. Definition: is a financial institution, which is authorized by SEO as an independent legal entity; (in Iran in form of a Mutual Fund) Construction Fund Objective: To collect macro & micro savings, devote them to build specified Constructing Project, sell the construction & eventually distribute obtained benefits among investors. Department of Supervision on Financial Institutions
20. Department of Supervision on Financial Institutions Fund ManagerAssemblyConstructorSupervisorTrusteeUnderwriterMarketMakerAuditorBoard of DirectorsGoverning & supervisory bodies of construction fundLiquidity guarantor
21. Risk AnalysesFinancial AnalysesTechnical AnalysesMarket AnalysesGeneral InformationConstruction process & planDetailed Expenditures (Endured & Predicted)Detailed MapsBusiness planDepartment of Supervision on Financial Institutions
22. 1Full text of article of Association & Prospectus2Financial Statements3Monthly Progress Reports4Market Makers’ Bid & Ask Quotes5NAV Reports both in Cost & Replacement Value6Announcements of General Assembly Meetings7Announcements about Capital Rising (Effecting Date & Capital Rising Results)Information to be disclosed through fund website8Any other reports requested by SEODepartment of Supervision on Financial Institutions
23. Establishment license & public offering permission Selecting ProjectFund ManagerPreparing article of association, prospectus, business plan & cash flow, along with related documents Bank receiptInvestorsAppointing Governing & Supervisory BodiesConstructorSupervisorTrusteeSecondary MarketMarket makerWebsiteTermination of phase oneUnderwriterFinancial resources for phase oneSteps for launching a construction fundSteps for launching a construction fundInitial public offeringInitial public offeringSpending money on phase 1Spending money on phase 1Secondary market for unitsSecondary market for unitsProgress ReportDepartment of Supervision on Financial Institutions
24. Capital risingInvestorsSEO Board of DirectorsFund ManagerProposing Capital Rising according to Business PlanApproving Capital RisingRequesting Permission for public offeringIssuing the Permission for public offeringSubscription NoticeSubscription NoticeThe Rights can be traded in secondary market.ExchangeUnderwriter The Underwriter is obliged to buy the unsold units & settles the related amounts to the Fund’s accounts Capital risingSubscription Notice Other Documents (Audited Financial Statement, Physical Progress Report, Financial Progress Report, … )Determining Initiation & Termination of Subscription period Investors have priority Right to participate in Capital RisingDepartment of Supervision on Financial Institutions
25. Nav calculation processBoard of DirectorsAuditorChartered AssessorRenders to RegulationDisclosure to the publicNAV REPORTNAV REPORT (at Cost & Replacement Value)Clean Report/with Immaterial ParagraphsAudit ReportReplacement Value for Assets & ExpendituresList of AssetsFinancial Statements(At end of each 3 months period)Financial StatementFund ManagerExpresses OpinionNominate Chartered AssessorsPreparesAppointsList of Assets & ExpendituresAuditorList of Assets & ExpendituresDepartment of Supervision on Financial Institutions
26. Acceptable expendituresField & Acquisition CostsFees payable to Governing & Supervisory BodiesArchitectonicsProject ImplementationCostsFoundationCostsLicenses & Permission CostsAdvertisement CostsInsuranceCostsChartered Assessors FeesFinance costsCostsDepartment of Supervision on Financial Institutions
27. Replacement valueFieldEquippingworkhouse Plans &DesignationMaterial in ProcessLicenseInstallation & set upReplacement ValueDepartment of Supervision on Financial Institutions
28. Qualified individuals who apply for participating in auction & render their bid price Execute the auction along with regulations & Assembly & Board of Directors ApprovalsApproves:Basic PriceAds budgetFinancial statements Construction saleThose who have rendered the best bid price are appointed as winners Offers :Auction documentsAds budgetDraft contractsBasic PriceNewspapers & magazinesWebsitesTV & RadioAdvertisingApplicantsWinnersFund ManagerGeneral AssemblyBoard of DirectorsTrusteeQualified individuals who apply for participating in auction & render their bid price Newspapers & magazinesWebsitesTV & RadioThose who have rendered the best bid price are appointed as winners Offers:Auction documentsAds budgetDraft contractsBasic PriceApproves:Basic PriceAds budgetFinancial Statements Execute the auction along with regulations and Assembly & Board of Directors ApprovalsDepartment of Supervision on Financial Institutions
29. Fund ManagerSupervisorLiquidity guarantorBoard of DirectorsAuditorTrusteeUnderwriterGoverning & supervisory bodies FeesConstructorMarketMakerDepartment of Supervision on Financial Institutions
30. Thank you