CAIRO: Prosecutor General Abdel Meguid Mahmoud referred Tuesday a complaint filed by a group of investors against the former chairman of the stock exchange and the head of the country’s regulatory body to the financial affairs prosecution office for investigation.
In a statement to Daily News Egypt, the EGX said that the former chairman has not been called in for questioning.
According to Egypt’s official news portal, investors accused former chairman of the Egyptian Stock Exchange Maged Shawky and Ziad Bahaa Eddin, head of the Egyptian Financial Supervisory Authority, of “taking decisions that violated market regulations during the recent collapse of the stock market, [in turn] negatively affecting the Egyptian economy.”
Mahmoud sent the complaint to the prosecution office responsible for financial affairs for further investigation and to question Shakwy and Bahaa Eddin.
The investors who filed the complaint were asked to provide further documentation and proof of the alleged violations.
In its statement, the EGX said, “Maged Shawky has not yet been contacted, addressed nor questioned with regards to any investigations conducted by the Public Prosecutor.”
The EGX added that all decisions taken to regulate the stock market were taken in accordance with the laws and regulations governing Egypt’s capital market.
Investors protested in May 2009 asking for Shawky’s resignation after accusing him of being responsible for losses they suffered as a result of his decisions.
In late 2009, the stock exchange suspended trading on 29 companies due to what it said were unjustified price increases, and asked the companies to clarify future plans to comply with new listing rules, saying they failed to adhere to financial laws and regulations regarding periodic advertising budgets and company share evaluations.
According to the EGX, these are all regulations intended to protect small investors affected by speculation.
Hanna Kheir El-Din, economist and former director of the Egyptian Center for Economic Studies, defended the bourse’s decision.
“If this is indeed the decision which has sparked all of this controversy, then the investors who are behind the charges are at fault,” Kheir El-Din said.
“If companies do not follow regulations, the bourse must ensure that their stocks are not traded and follow all regulations and procedures regardless of the potential fallout,” she added.
“Sometimes decisions like these may lead to ups and downs in the markets, but in the long run, there is a steady upward trend and investors have to wait and see what happens, instead of focusing on some decisions which cause fluctuations in the short run,” Kheir El-Din concluded.
Shawky’s five-year tenure as the head of EGX ended Saturday when Prime Minister Ahmed Nazif issued a decree appointing Khaled Serri Seyam, previously deputy chairman of the EFSA, to take his place as of July 15.
“Investors in the EGX have received the news of Shawky’s resignation favorably, as stock markets have made substantial gains and have seen an increase in liquidity,” a statement on Egynews said.
“Some experts have attributed the positive performance capital market to the general sense of satisfaction among investors with regards to the change,” it added.
According to a statement on the Ministry of Investment (MOI) website Saturday, Mahmoud Mohieldin said that Ziad Bahaa Eddin, who is now implicated in the charges, had played a part in the prime minister’s decrees.
"These decrees, which came after consultations with EFSA Chairman, Dr. Ziad Bahaa Eddin and were approved by Prime Minister Nazif, came as part of injecting new blood into the EGX and EFSA — believed to be an essential feature for the development process to continue,” said Mohieldin on the ministry’s website.
Just days before news of the investigation came out, the minister praised Shawky’s “stellar performance and effort during his service as EGX chairman to develop the Egyptian Stock Exchange, increase its trading volume and complete its institutional structure under the tough times witnessed by the global economy.”
