CAIRO: After amending Egypt’s Capital Market Law early this month to impose harsher penalties on violations of trading rules or disclosure of information, parliament is mulling over equating insider trading infringements with money laundry crimes.
The People’s Assembly approved June 3 amendments proposed by the Capital Market Authority (CMA) to law 95 of 1995, which mainly raised fines for infractions of trading between LE 20,000 and LE 2 million – up from LE 10,000 – along with imprisonment for at least two years.
Individuals, listed companies, and brokerage firms are subject to the new penalties if they are found guilty of causing or benefiting from information leaked on securities listed on the stock market.
The new law merged the Cairo and Alexandria Stock Exchanges into one entity – the Egyptian Stock Exchange, according to the CMA, and set new rules to prevent insider trading and strengthen transparency and disclosure regulations.
The amendments will also expand investor base, increase trading on the stock exchange, and strengthen supervisory authorities without undermining the flexibility necessary for trading on the stock market, as they conform to corporate governance procedures.
“Imposing more regulations and control in terms of transparency is always needed, especially in emerging markets. And Egypt is a pioneer in this, said Mohamed Radwan, head of foreign desk at Pharos Holding.
“By adopting these new regulations, the CMA will put more control [on trading] and ensure that there is impartial information available for market participants on a fair basis, he added.
Recently the CMA – along with the Egyptian Stock Exchange – slammed the brakes on several stocks due to insider trading infringements.
Last August, the stock exchange cancelled all trading for two days on Nasr City Housing Development when it did not disclose information regarding its decision to increase issued capital to LE 100 million, which gave room for insider trading on its stocks.
As a result, the stock exchange imposed a fine of LE 10,000 on the company to be paid within 10 days; otherwise, the company’s shares would be de-listed from the bourse.
The most recent violations on the market occurred June 9 when trading on Piraeus Bank Egypt propelled the price past the 20 percent daily increase limit set by the exchange for its most active stocks.
The rush for Piraeus stock followed the Capital Market Authority’s notice that it had sanctioned a 25 percent boost for the bank’s issued capital, upping it to LE 1 billion.
During that day’s session, the bourse cancelled trades of Piraeus stock when some information about the decision leaked prematurely, according to Zawya.com, a Middle East business news site.
Representatives at the CASE said the exchange suspended Piraeus trading because its share price triggered the “circuit breaker, or the trading limit put in place to ensure market stability.
Radwan ruled out the possibility that the newly imposed harsher penalties of the Capital Market Law would disrupt operations of brokerage firms in Egypt or have a negative effect on trading.
“Eighty percent of the market’s turnover is [dominated] by the top 20 brokerage houses, so everybody who manipulates the market will be among the smaller companies, he explained.
“The smaller companies are the ones that will suffer, but mainly the major firms abide by the law and have a reputation to protect.
