By Shadia Nasralla

CAIRO, Aug 5 (Reuters) - A decree issued by Egypt's interim head of state on Monday means people no longer face jail for insulting the president, after a surge in such cases under deposed leader Mohamed Mursi including that of a popular comedian dubbed "Egypt's Jon Stewart."

The legal change by interim President Adli Mansour was welcomed by activists who had voiced concern over the high number of investigations during the one-year rule of ousted Islamist Mursi, who was toppled on July 3.

But Human Rights Watch Egypt said the decree did not go far enough, arguing that insulting the president "should not be an offence in the first place."

Several Egyptians were investigated for insulting Mursi during his brief term in office, fuelling fears that the Muslim Brotherhood politician was trying to crush freedoms won in the 2011 uprising that ousted veteran autocrat Hosni Mubarak.

The most high profile case was that of Bassem Youssef, a popular comedian likened to U.S. satirist Stewart, who regularly poked fun at Mursi.

The prosecutor general ordered Youssef's arrest in March, drawing criticism from Washington, but the cardiologist was released on bail.

Youssef hosted Stewart on his show in Cairo in June, and Stewart took aim at Mursi and his government, saying: "A joke has never shot teargas at a group of people in a park. It's just talk."

The army removed Mursi from power following mass protests against his rule and replaced him with Mansour, the head of the Supreme Constitutional Court.

Under the decree, those found guilty of insulting the president face a fine of up to 30,000 Egyptian pounds ($4,300). Under the previous law, they could be jailed for up to three years.

"We were hoping (such cases could be dealt with) through civil litigation and compensation, not fines, but it is still a good step," rights lawyer Gamal Eid said.

"We are against imprisonment and we prefer no criminal courts for publishing crimes," he said.

He added the 28 cases of "insulting the president" brought during Mursi's year in office compared with a total of 24 cases over the 115 years that preceded his election win last June.

Many of the cases were brought by private citizens sympathetic to Mursi and his Muslim Brotherhood.

But Egypt director at Human Rights Watch, Heba Morayef, called on the interim leadership to go further.

"This amendment, while a general step in the right direction, doesn't go anywhere near far enough, because it doesn't address the multiple provisions in the penal code that limit freedom of expression," she told Reuters.

Under the amended law, anyone found guilty of insulting the president would face a minimum fine of 10,000 pounds. ($1 = 6.9949 Egyptian pounds) (Reporting By Shadia Nasralla; Editing by Tom Perry and Mike Collett-White)