The Stock Exchange Issues New Guide

Last week, the Egyptian Stock Exchange (“EGX”) issued new executive procedures for the registration and execution of private and public offerings of securities.[1] These come in application of a previous decision issued by the Financial Regulatory Authority (“FRA”) last April No. 48 of 2019[2] which set out the rules for such offerings.  It is worth noting that the rules issued by FRA included detail provisions covering the listing of securities including the definition of “listing”, “trading”, “public offering”, “private offering” and “qualified investors”, as well as rules, procedures and conditions pertaining to each type of offering. In this context the new executive procedures issued by EGX introduce the following specific features:

• Allowing the issuing company to amend the schedule of offering after it has been announced with the approval of EGX and upon request of the offering advisor, on condition that this is based on acceptable justification and that it is made at least two working days prior to the end of the orders registration period.

• Requiring EGX, during the order registration period, to announce on its screen the percentage of subscription in a private placement and its price as notified to it by the offering advisor.

• Requiring EGX to announce on its screen any significant information it receives from the investment advisor regarding the issuing company or the offering.

• Requiring EGX to delete orders by clients subscribing in the public placement as soon as their private placement orders are registered in the EGX system following the completion of the allocation by the offering advisor.

• Requiring EGX to announce the total quantity of registered orders and to inform the Central Depository Company of such quantities that are ready to be executed for the account of brokers in order for the Central Depository Company to verify the availability of required cash in brokers accounts. If the Central Depository Company finds that no sufficient cash accounts are available it notifies EGX in order to reduce the registered stocks and announce the same. EGX may also adjust the value of the offering if the broker companies fail to deposit sufficient cash covers with ensuing legal consequences. If this results in failure to meet the minimum requirements for the number of subscribers or of number of freely available securities, EGX may reconsider the whole offering and announce the same to the market.

It is clear that these procedures aim at improving the mechanisms for the transparency and disclosure with respect to public and private offerings and ensuring that real and serious orders are being registered in in order to prevent influencing the public or the markets by claiming the existence of orders that are either unreal,  unconfirmed or unsupported by cash cover. This will provide the market with a realistic view of demand on the offered securities. It is certainly an excellent step forward and should improve the transparency of offerings and protect the rights of the subscribers.   [1] EGX Decision No. 1430/2019 on the executive procedures for the registration and execution of private and public offerings, available through this link (in Arabic). [2] FRA Board of Directors Decision No. 48/2019 with the regulations and procedures of public offerings and private placements, Egyptian Gazette, Issue No. 96, 24 April 2019.