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Sunday, 29 May 2016

Brokerages could face market share caps under proposed Investment Ministry regulations

Brokerage houses watch out: The Investment Ministry is moving to limit the market share of any one brokerage house or group of houses that share a corporate parent, according in a note made in passing at the end of a cabinet statement issued Thursday. The proposed amendments to the Capital Markets Law’s executive regulations have been sent to the Egyptian Council of State (Maglis El Dowla) for review and will force the regulator to take market share changes into consideration when reviewing mergers and acquisitions and in reviewing transactions that would result in changes in shareholder structure.

Who’s in the cross hairs? Al Mal says the move comes as Beltone Financial and CI Capital await regulatory approval on their merger, which it says would see the new entity hold a 25% share on the EGX. Sources close to the two outfits told the paper that the proposed regulatory changes could put the transaction at risk. Where does Beltone stand in terms of market share? The merged CI Capital + Beltone would hold 10.3% (not 25%) market share in 4M2016, making it the second-largest player in the market. EFG Hermes (via Financial Brokerage Group and Hermes Securities Brokerage) held a 19.3% market share in the same period.

The proposed regulatory changes have caught the industry by surprise. Mohamed Maher, deputy chairman of Prime Holding, told Al Mal he was unaware of the details of the proposed changes, but said he hopes the government would not impose unnecessary regulation. Mohamed Taymour, head of the Egyptian Capital Markets Association and chairman of Pharos Holdings, supported the decision in principle, saying it would be dangerous for one entity to hold a market share of 50% or more.

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