Since July 2004, several legislative developments have been introduced pertinent to the capital markets in Egypt, leading to substantially higher trading levels compared to previous fiscal years. The section below lists the main developments related to deepening the market, developing market institutions, enhancing investors’ protection and transparency.
Deepening the Market and Adding New Financial Institutions and Instruments
• Regulating the activity of short selling by issuing Ministerial Decree No. 192/2005 on amending some provisions of the executive regulations of the Capital Market Law, by adding a ninth chapter to the regulations.
• Introducing the system of intra-day trading in October 2005. The system provides an opportunity to investors to benefit from intra-day price fluctuations. The system increased the average daily trading volume by almost15%.
• Introducing and regulating the activity of securitization by issuing Ministerial Decree No.46/2004 adding a new chapter to the executive regulations of the Capital Market Law No. 95/1992.
Developing Capital Market Institutions
• The General Authority for Financial Supervision was created by law No.10/2009. The authority is mandated to supervise and regulate non-bank financial markets and instruments including the equity and derivatives markets, insurance, mortgage finance, financial leasing, factoring and securitization in order to realize soundness and stability of markets and instruments and organize and develop activities, maximizing their competitive capability to attract more local and foreign investments. The authority would minimize risks of lack of coordination and address issues that emerge due to different supervisory regimes.
• Developing the Egyptian Exchange and its listing rules to be aligned with international practices by issuing law No.123/2008 which amended some articles of the Capital Market among which, merging the Cairo and Alexandria Stock Exchanges into a single legal entity called "Egyptian Exchange" and amending the old listing schedules to reflect market needs and international practices in this area. Additionally, amendments to the law aimed at reducing the minimum nominal value per share to ten piaster instead of LE 1 pound, extending the investors' base in the field of securities and adding more flexibility to transactions on the market.
• Organizing the activity of investment funds to cope with market developments and requirements by issuing ministerial decree No. 209/2007 on some provisions of the executive regulations of the capital market law by replacing the second section of the third chapter of the regulations by a new chapter titled "Second Chapter: Investment Funds." The new chapter regulated new kinds of collective investment vehicles such as money market mutual funds, and real estate mutual funds.
• Introducing financial solvency standards for securities brokerage companies. The new rules were issued by the decree No.14/2007 by chairman of the Capital Market Authority. Additionally, a Ministerial Decree No. 314/2006 was issued amending some articles in the executive regulations of the capital market law whereby the paid in and issued capital were increased for securities brokerage companies to ensure the financial soundness of these companies.
Protecting Investors' Rights
• The law No.123/2008 broadened the definition and scope of price manipulation in such a way to cover new mechanisms adopted by violators and to ensure investors' rights are protected by enhancing the capabilities of the regulator. Originally, combating price manipulation was introduced by the Ministerial Decree No. 141/2006. Additionally, the amendments increased the maximum limits of fines to be imposed on violating the provisions of the Capital Market Law to LE 20 million for serious violations.
Enhancing Disclosure and Transparency
• Law No.123/2008 stipulated the establishment of a special registry for auditors who are entitled to audit and review companies operating in the field of securities, companies with listed securities and public subscription companies. The Capital Market Authority is entitled to list into and delete from the registry, which is an effective tool to ensure companies' commitment to requirements of corporate governance and transparency.
• Enhancing the quality of disclosure and transparency by issuing Ministerial Decree # 166/2008 to approve the Egyptian Auditing Standards in accordance with international auditing standards.
• Developing the Egyptian Accounting Standards by issuing Ministerial Decree No. 243/2006 on issuing the new Egyptian Accounting Standards to replace the currently implemented accounting standards. The new standards cope with international accounting standards.
• Adding a new chapter to the executive regulations of the Capital Market Law regulating acquisitions for listed companies by issuing Ministerial Decree No.12/2007. The new chapter was added to meet the increase of acquisitions in the Egyptian market during the recent period. The new chapter aims at introducing full transparency, banning manipulation in shares prices and exploitation of insider information, ensuring equal opportunities among securities owners and investors with regards to the availability of information, and proper timing and protecting interests of companies being offered.
• Organizing the Egyptian Institute of Directors by issuing Ministerial Decree No. 188/2004 to be assigned to train and increase awareness of executive directors and board members of joint stock companies.