We call financial instruments securities that can betraded in financial markets.The Moroccan Authority of Capital Markets classifiesfinancial instruments into several distinct catergories.
The most prominentones include the following items:1. StocksIt’s a security that represents a portion of ownershipof the company. Whenever the company decides to redistribute a part of itsrevenues to investors, as opposed to reinvesting them in the company, theshareholders will receive dividends. However it’s not systematic. Otherbenefits of the shareholders include having the right to vote (specific tomajority shareholders). In case of bankruptcy, the shareholders receive what isleft, if any, of the assets after having repaid the debts and collaterals. Theyalso have the right to information, as mentions the AMMC website.
Theshareholders have the right to know how the company is performing by consultingits financial statements.2. BondsBonds are securities that allow the company to raisecapital for its new projects. They have a predetermined maturity, yield tomaturity, and coupon.
The AMMC definessix types of bonds:Ø SubordinatedObligations, also known as subordinated debt is a debt that is paid last incase of liquidation of the company. It’s still considered as debt and thereforeis subordinated bond holders are paid before shareholders.Ø Convertible Bonds:the creditor has the right to convert the bond into company shares if he/shefeels it would be more profitable.Ø Mandatory ConvertibleBonds: at the maturity, the bond will beconverted into stocks.Ø Zero Coupon Bonds:Bonds that pays no interest (i.e no coupons); the present value is thereforerelatively low and the interest rate high.
Ø Fixed Rate Bonds:bonds where the interest rate in predefined and fixed.Ø Floating-rateBonds: the coupon rate is changingdepending on a variable rate. Accordingto the AMMC, these bonds in Morocco are called revisable-rate bonds(obligations à taux revisable). 3.
Mutual Funds (OPCVM):One ofthe most popular financial instruments in Morocco is mutual funds because ofthe low transaction costs. They’re run by managers who invest the money pooledby the fund investors into various sectors of the industry in order to producecapital gains (Investopedia, n.d). The “Organismes de Placement Collectif en ValeursMobilières” OPCVM, (UCITS in english) are mutual funds that allow Moroccaninvestors to build optimal portfolios. There are many types of OPCVM operatingin Morocco:Ø OPCVM Stocks: mainlycomposed of companied listed on the Casablanca Stock Exchange. Ø OPCVM Bonds: composedof long-term and short-term bonds, low risk, can’t contain more than 10% of stocks.
Ø OPCVM Monetary:contains securities of the money market such as treasury bills and federalfunds.Ø OPVCM Contractual:the expected outcome/performance is agreed upon and mentioned in a contract.Ø OPCVM Diversified:composed of both stocks and bonds and don’t belong to any of the abovementioned.As mentioned in the AMMC website, there are two legalforms of OPCVMs; SICAV and FCP. SICAV, Société d’Investissement à Capital Variable, isa company where the investors are stockholders and have the right to weight-inon management decisions and strategies. FCP, Fonds Communs de Placement, is atype of mutual fund where the investors have joint ownership of the securities.
It’s managed by an independent institution that acts on behalf of theinvestors.4. Securitization Funds (FPCT):As cited on the AMMC website, the FPCT (Fonds dePlacement Collectifs en Titrisation), are a type of financial instruments thathelp companies build debt portfolios and issue bonds in order to raise capital.
5. Venture Capital Venture Capitals, Organismes de Placement enCapital-risque (OPCR), are investment funds that specialize in funding start-upcompanies. They’re considered high-risk high-return investments. In Morocco, thereare two legal types of venture capitals: “le Fond Commun de Placement à Risque”(FCPR) and “la Société de Capital-risque” (SCR).