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Wednesday, 14 February 2018

House passes amendments to the Capital Markets Act

LEGISLATION WATCH- The House of Representatives voted into law yesterday amendments to the Capital Markets Act that pave the way for the introduction of new financial instruments. The act saw amendments to some 45 articles, the most extensive change to the law since it was first issued 26 years ago, Investment Minister Sahar Nasr said on Tuesday, AMAY reports. Nasr also noted that there are more amendments to the act in the pipeline.

So, what’s new? Readers of Enterprise are likely familiar from our past coverage with most of the major changes. They include:

  • Setting up a framework for companies and the government to issue sukuks. Details of procedures for issuance will be laid out in the executive regulations, but what you would need to look out for is that the law prohibits holding more than one sukuk issuance at a time.
  • Allowing for trading of futures contracts and the opening of an exchange for futures. The amendments also set a minimum capital base of EGP 20 mn for brokerages looking to trade on futures exchanges.
  • Allowing for the establishment of a commodities exchange as well as privately-owned stock exchanges. Private exchanges would face licensing fees of no more than EGP 100k.
  • Reducing listing fees to 0.002% of the value of the financial instrument or stock to encourage smaller companies to list.
  • Tightening penalties for violators of the act by setting a fine of no less than EGP 20 mn and prison terms of no more than five years.
  • Setting up a federation for non-banking financial companies similar to the Federation of Egyptian Banks.

No short selling or short-term bonds yet? Would-be shorts and issuers of short-term paper will have to wait a while longer, it seems—we could find no reference to either in official documentation released yesterday. The Financial Regulatory Authority (FRA) had said that short-selling will be part of the executive regulations of the act, which are currently still being drafted. We had noted that FRA had been trying to squeeze short-term debt instruments into the act, but that appears to not have made it. We assume these would either be included in the upcoming regs or introduced to the law later under the additional amendments that Nasr signaled yesterday.

You can read the full Capital Markets Act courtesy of Youm7 or skim a side-by-side comparison of the old and new law from Al Mal (if you can decipher it).

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