CAIRO: The Capital Market Authority (CMA) set new guidelines regulating the registration of independent financial advisors chartered for providing appraisal and financial consultancy services and analysis of companies that list security bonds in the Cairo and Alexandria Stock Exchange (Case) and other companies in the field of security bonds.
The CMA stipulated a minimum past experience prerequisite of at least three yeas, in addition to other stringent internal auditing and confidentiality company conditions, as well as guarantees to the independence of these advisors as verified by the CMA.
According to the new regulations, only companies listed by the CMA as providers of underwriting and promotion, and financial advisory services, Egyptian banks, and branches of foreign banks in Egypt, and foreign investment banks are eligible for registration with the CMA as providers of financial advisory services.
The CMA will also maintain the right to suspend or disqualify registered advisors who fail to comply with the confidentiality, disclosure, and independence requirements. Minister of Investment Mahmoud Mohieldin announced on Wednesday the inclusion of financial consultancy as a new service offered by companies working in the field of securities in accordance with Article 27 of the Capital Market Law No. 95 of 1992.
The regulations aim to bring companies working in the field of financial services in Egypt in line with international performance standards and to deal with the emerging phenomenon of the proliferation of unqualified entitiesand individuals who started providing advisory and consultation services that hurt those dealing with the securities market, said a statement issued by Mohieldin.
The decree sets the capital needed to be registered as an independent financial advisor at LE 250,000 fully payable to the CMA.
A CMA official who preferred to remain anonymous told The Daily Star Egypt that the decision was step to improve the investment atmosphere in Egypt through providing more protection to investors against risks associated with capital acquisition operations in the Egyptian securities market, and prevent the unauthorized disclosure or misuse of financial information.
But industry observers believe that while aiming to regulate the emerging financial services sub-sector, the actual implementation of the regulation process will be challenging.
A large number of brokerage companies provide financial services to clients within various contexts, including ‘insider information’ that would be impossible to regulate.
Also, the capital required for registering with the CMA is also not prohibitive to any existing public participation company working in the field of investments or financial services, observers said.
The move comes in light of an increasing demand for financial advisory services and the emergence of a new breed of the so-called independent financial advisors blamed for providing investors with financial advice based on unverifiable information, and a marked activity in Egypt s privatization drive.
