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Amendments of the Listing Rules Gov

Amendments of the Listing Rules Governing Insider Trading
The board of directors of the Egyptian Financial Supervisory Authority (“EFSA”) issued decision No. 114 of 2015[1] regarding the listing and delisting rules of securities listed on the Egyptian Stock Exchange (“ESE”) to amend certain provisions governing insider trading of securities (the "Decision").
Background
The Capital Market Law No. 95 of 1992 provides in Article 16 that EFSA’s board shall issue the rules and conditions governing the listing and delisting of securities on ESE. Indeed, several decrees have been issued by the Capital Market Authority (EFSA’s predecessor) followed by decrees by EFSA in this respect. Before this month’s amendment, the most recent decree had been Decree No. 11 of 2014, which was approved by EFSA’s board on January 22, 2014. At its meeting dated September 30, 2015, EFSA’s board approved the amendment of Decree No. 11 of 2014 as set out in detail below. The amendments to the listing rules are intended to fine-tune certain provisions governing insider trading. In general, insider trading is the trading on securities by every person who is privy to privileged information about the company that is not known to the public or to which the public would not have access. Insider trading is illegal in most jurisdictions given the privilege it gives to such insiders over a typical investor trading on the same security.
 Amendments
The Decree provides that a company that has securities listed on ESE must notify ESE with the internal procedures it adopts to ensure the following:
  1. Insiders and their related parties may not trade on securities issued by the company during a timeframe of five days before and one day after the publication of material information. The term “material information” is defined by the executive regulations of the Capital Market Law as being “information that may have a substantial effect on the price of a listed security or one that is likely to be listed; on investment decisions of those trading on such security; or on market trends. Material information is deemed public when made available to investors at the same time through the same channels in accordance with the rules and procedures governing disclosure at the exchange”.

It is worth mentioning that Decree No. 114 of 2015 added the prohibition of insider trading for insiders’ related parties which was absent from Decree No. 11 of 2014.

  1. Shareholders directly or indirectly holding 20% or more of a company may not trade on its securities prior to notifying ESE. Before amendment, this rule applied to shareholders directly or indirectly holding 10% or more of a company. The listing rules further provide that the contemplated transaction notified to ESE must be consummated within a maximum of one month from the date of notifying ESE.
ESE must publish all transactions carried out pursuant to this provision immediately after the trading session and in any case before the next session, even if a transaction was only partially consummated. Article 38 of the listing rules further prohibits (1) board members, regardless of their shareholding; (2) officers of the company; and everyone with access to privileged information that may affect the price of a security from selling or buying such securities.
 Conclusion
The Decree increased the thresholds subjecting an owner of a security to the requirement to notify ESE prior to carrying out any trading on securities of the same company by increasing the shareholding threshold from 10% to 20%. This amendment was made because many shareholders owning 10% of the share capital of a company were not represented on its board and generally not privy to information that would qualify them as insiders and thus subjecting them to the disclosure rules applicable to insider trading. This amendment ensures an increased flexibility that may help in stimulating the market. It is worth mentioning that the present decree was approved by the board of EFSA at its meeting dated September 30, 2015 and provides that it shall be published in the Egyptian Gazette and on EFSA’s and ESE’s websites and shall enter into force on October 11, 2015. It has, however, only been published in the Egyptian Gazette on October 24, 2015.   [1] EFSA Board of Directors' Decision No.114/2015 amending the Rules on Listing and De-Listing on the Egyptian Stock Exchange, Egyptian Gazette, Issue No. 239, 24 October 2015.
The board of directors of the Egyptian Financial Supervisory Authority (“EFSA”) issued decision No. 114 of 2015[1] regarding the listing and delisting rules of securities listed on the Egyptian Stock Exchange (“ESE”) to amend certain provisions governing insider trading of securities (the "Decision").
Background
The Capital Market Law No. 95 of 1992 provides in Article 16 that EFSA’s board shall issue the rules and conditions governing the listing and delisting of securities on ESE. Indeed, several decrees have been issued by the Capital Market Authority (EFSA’s predecessor) followed by decrees by EFSA in this respect. Before this month’s amendment, the most recent decree had been Decree No. 11 of 2014, which was approved by EFSA’s board on January 22, 2014. At its meeting dated September 30, 2015, EFSA’s board approved the amendment of Decree No. 11 of 2014 as set out in detail below. The amendments to the listing rules are intended to fine-tune certain provisions governing insider trading. In general, insider trading is the trading on securities by every person who is privy to privileged information about the company that is not known to the public or to which the public would not have access. Insider trading is illegal in most jurisdictions given the privilege it gives to such insiders over a typical investor trading on the same security.
 Amendments
The Decree provides that a company that has securities listed on ESE must notify ESE with the internal procedures it adopts to ensure the following:
  1. Insiders and their related parties may not trade on securities issued by the company during a timeframe of five days before and one day after the publication of material information. The term “material information” is defined by the executive regulations of the Capital Market Law as being “information that may have a substantial effect on the price of a listed security or one that is likely to be listed; on investment decisions of those trading on such security; or on market trends. Material information is deemed public when made available to investors at the same time through the same channels in accordance with the rules and procedures governing disclosure at the exchange”.

It is worth mentioning that Decree No. 114 of 2015 added the prohibition of insider trading for insiders’ related parties which was absent from Decree No. 11 of 2014.

  1. Shareholders directly or indirectly holding 20% or more of a company may not trade on its securities prior to notifying ESE. Before amendment, this rule applied to shareholders directly or indirectly holding 10% or more of a company. The listing rules further provide that the contemplated transaction notified to ESE must be consummated within a maximum of one month from the date of notifying ESE.
ESE must publish all transactions carried out pursuant to this provision immediately after the trading session and in any case before the next session, even if a transaction was only partially consummated. Article 38 of the listing rules further prohibits (1) board members, regardless of their shareholding; (2) officers of the company; and everyone with access to privileged information that may affect the price of a security from selling or buying such securities.
 Conclusion
The Decree increased the thresholds subjecting an owner of a security to the requirement to notify ESE prior to carrying out any trading on securities of the same company by increasing the shareholding threshold from 10% to 20%. This amendment was made because many shareholders owning 10% of the share capital of a company were not represented on its board and generally not privy to information that would qualify them as insiders and thus subjecting them to the disclosure rules applicable to insider trading. This amendment ensures an increased flexibility that may help in stimulating the market. It is worth mentioning that the present decree was approved by the board of EFSA at its meeting dated September 30, 2015 and provides that it shall be published in the Egyptian Gazette and on EFSA’s and ESE’s websites and shall enter into force on October 11, 2015. It has, however, only been published in the Egyptian Gazette on October 24, 2015.   [1] EFSA Board of Directors' Decision No.114/2015 amending the Rules on Listing and De-Listing on the Egyptian Stock Exchange, Egyptian Gazette, Issue No. 239, 24 October 2015.